It's a Broker Thing
It’s a Broker Thing brings you real broker conversations, the kind that happen when you’re talking shop with someone who understands the pace, the pressure and the unexpected moments that come with the job.
Each episode shares stories, insights and practical ideas from people who’ve genuinely lived broking, with honest chat and a few laughs along the way.
This podcast is for general education only and isn’t financial, legal, or tax advice. The guests’ views are their own. Bluestone accepts no liability for errors or how you use this information.
It's a Broker Thing
14. Bonus Episode: Talking Shop & Making Sense of Recent Changes - with guests, Richard Chesworth & Aaron Taylor
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The housing market is facing no shortage of change.
In this bonus episode of It's a Broker Thing, Tony MacRae is joined by Richard Chesworth and Aaron Taylor for a candid discussion about recent budget measures, housing affordability and what these developments could mean for borrowers, brokers and the broader property market.
Drawing on their experience across specialist lending, construction, SMSF lending and broker partnerships, the conversation explores the practical realities of a changing market.
They share their own perspectives on how the market may respond, where opportunities may emerge and how brokers can continue to support clients through uncertainty.
🎙️ Listen to the bonus "Talking Shop" episode now.
Welcome to It's a Broker Thing podcast, brought to you by Bluestone Home Loans. Each episode we'll dive into market updates, practical insights, and real stories for brokers who want to stay ahead, build stronger relationships, and grow their business. Let's dive in. Amongst a backdrop of rising interest rates, a cost of living crisis, and a housing supply shortage, the government has handed down one of the most controversial budgets in many a year. In today's episode, we thought we'd try and unpack some of the impacts of uh the budget and how it's potentially going to impact on the housing market and lenders moving forward. Joining me today is Richard Chesworth, uh head of specialist lending at Bluestone Home Loans, and Aaron Taylor, head of non-standard lending from uh Bluestone Home Loans. Guys, thank you and welcome again to It's a Broker Thing.
SPEAKER_02It's good to be here, Tony, and uh what a topic we got today.
SPEAKER_01We're gonna take the gloves off, and uh there's no net today. We're uh we we're we we're just gonna see where this takes us. But I'm gonna open it up off the bat. Really controversial changes uh to the in the budget that's gonna impact housing. We've seen capital gains tax changes, we've seen negative uh gearing uh removed from existing dwellings, superannuation, no longer uh limited recourse borrowing, um, which is near and dear to your um heart, Richard. But I'm confused because the rhetoric that we're being told is this is being done to help first home buyers. But every way I add things up is investors which are typically better off than first home buyers are gonna move to lower value properties with higher yields or new builds to continue to take advantage of uh the uh negative gearing and capital gains. How is that gonna help first-home buyers?
SPEAKER_00Tony, I think that's a it's a tough question to uh to answer, and I don't think anybody's gonna really have a positive one for you there because that quite frankly, there isn't a good answer to it. Uh, I think we we've we've had the suggestion that uh the first home buyers that go to auction won't have to be competing with in as many investors anymore, but the reality is what first home buyers are actually going to an auction. We're gonna see investors pivot into this this new build space, which has largely been dominated historically by the first home buyers, uh, and all of a sudden they're gonna be pushed out. So I I don't really have the answers, Cheszy.
SPEAKER_02Yeah, it's a difficult one to answer. Um does it come back to this overall affordability question? Does it come back to the growth we've seen in the Australian property market? Um, the added reliance on mum and dad, the separation in wealth gap, um, for you know, you've got areas where people actually can't afford to move. For example, to Sydney. Um, younger people, first home buyers, people can't afford to move to Sydney because of the prices. However, look at all the change we're going to see at the moment. Perth for years has gone through the roof, but but off a very slow base. The growth in the property market, and I'll say it, I was out of it for a number of years, for about eight years, and to step back in was quite challenging. So um is it just a fourth first homer situation, or is it a broader affordability question um which is being dealt with here?
SPEAKER_01Uh are these changes not an admission that we just can't fix the real underlying issue, which is supply, and so we'll try and attack the demand side of the equation?
SPEAKER_02The supply front and um and I'm actually gonna quote um Alan Kohler here. He was on the news the other week, one of the the programs, or one of the I I love watching the ABC. There you go. It frames me a bit further there. Um and he he was talking about the actual amount of build going on and the amount of new builds that have happened. And I think the argument's been it's kind of yeah, we've got population growth here and we've got build here, but then the w the way he framed it on average there's 2.44 people that live in every house. And so if it's linked to um probably kind of increased supply or and and to to manage demand, he said actually on that level we'd actually have had to have lift migration to keep up with the supply. So look, it's it's uh I think that's a numbers gain as well, maybe with an economist plan, but it's a different light to to put on things. It's also I think utilate the utilisation of property. You know, we've got um the rental market's so tight, but we've got a whole lot of short-term rental out there as well. Um, so it's it's where that the market's shifted to in general, which I think is a a bigger issue to free up supply, free up demand.
SPEAKER_01Is that you know, so I don't have all the answers there, but but we don't seem to be doing anything to to free up supply. And I I've I I've spoken before, we we we we seem to be incentivising first home buyers, and I'll get to that because I think there's some real dangers attached um to that particular piece, particularly in light of these changes. But we talk about and provide lip service to asking um older people that uh the family's moved out, and it may be um a couple living in a four-bedroom house to downsize, but we don't do anything to help those people. And and in fact, we actually penalise them sometimes. And I've spoken about my parents' situation that did this last year, got no support, had to play um some stamp duty, but actually then lost their medical benefits because they made a little profit um on it, and there just doesn't seem to be incentives to actually address the supply issue to me. Yeah. And that's right.
SPEAKER_02Being through that and um also wearing another hat, and I've always been very active in the self-managed super fund lending world. I've had large exposure in the reverse mortgage space as well. But yeah, the incentive for people to downsize and that provides further liquidity in the market, um, yeah, they if I downsize my home, there's a couple of good options there. I've got my downsizer contributions I can make to super up to 300,000 per person, but there's timings there. But in saying that, the cost as well, as you said, stamp duties and the like, there's so many limitations. There's still not there's not the incentive and the attractiveness for people to to make that shift, which is actually, you know, not just financially, but sometimes better for their well-being to be able to live in a more manageable um home, one way or another.
SPEAKER_01Oh absolutely, and you know, I I and I know our circumstances with mum and dad, they've never been happier, and and so it's it's a real tick there. But I I I think too um there's a lot of people that hold off because there is this fear, and it was a major step for them um moving out of a place they lived in for 53 years. Um now they're there, love it, but we sh I think we should be doing more to address issues like that, cutting red tape, getting more places built and and and people into those. We've got to because we're we have an aging population.
SPEAKER_02And the way we're going, the shift from people in um the workforce compared to people over the retirement age is growing and growing and growing. We need to be able to manage that better. And part of that is potentially downsizing to free up the equity in the home. Yes, you might you lose age, pension, but you have more liquidity there to support yourself in retirement, retiring years as well. But it adds that liquidity to the market.
SPEAKER_00I think I think you're you're you're also talking about one side of the market, which is you know the aging population and the downsizing. But you flip it around and you look at the first home buyers, and they're they're they're looking at a market that it's hard to get into, and then there's costs associated with upsizing. If they ever want to grow, you know, their their family, you know, they're they're a young couple, they're thinking about having kids, they have to buy in at an entry point that that is ridiculous for them because they if they ever sell that property, they're gonna have to have to then pay another lot of stamp duty to buy into their second place, as well as the associated cost with with selling their first place. So for for young couples looking at stepping into the property ladder, they're trying to go up and above, you know, where where you know historically maybe they could have. Uh, you know, having having lived and worked in New Zealand, you know, with no stamp duty, um, it's a it's a completely different ball game because for for young customers, they can they can buy in at a at a at a level that actually suits them and their current situation rather than trying to buy into uh a property market that that actually doesn't suit their current situation. I think that's a a whole nother piece of the puzzle that that doesn't really get addressed in Australia.
SPEAKER_02It's interesting though, because may need to fact-check this, but the ACT has moved to an area kind of stepped away from um the Stamp Duty on purchases, or they're if not completed, they're well down the path of doing that. So you don't have that again hurdle in stepping into the new property.
SPEAKER_01Let's talk about first home buyers for a minute. So um tens of thousands of first home buyers have been encouraged to enter the market through highly leveraged, highly geared 95% uh loans through the government scheme. The most conservative estimates of these uh tax changes that have been put through is a 5% drop in property prices in the medium term. Some have gone as high as 20%. Haven't we just put a whole bunch of first-home buyers into highly geared properties that are now in um negative equity territory? What are we what does the government say to them?
SPEAKER_02I've seen it before, not in the same process with uh you know the the government assistant to buy. But I remember back in 1996, I lived in Canberra at the time. There's a change in government, everyone was buying, you know, first homes were borrowing that 90-95%. Um there was that many redundancies in the public service when the government changed that there wasn't actually enough people to actually process the redundancy payments at the time, but the property market went backwards, and yeah, negative equity. Negative equity is a real issue. Um, you know, of course, your purchase isn't a short-term thing, it's a longer term play. Um, so uh yeah, but to be in a position where this has been incentivized through policy is a concern. I also think we've seen it time after time where uh government intervention one way or another into a free market tilts and blurs the market with its first homeowner schemes, this and look, I I actually think in the last election there was no win there because the other option was okay that you know the the other other party was saying accessing super to buy your home, buy your first home and the like. These are all inflationary measures, incentives and first homeowner um schemes, basically almost like a second homeowner scheme, because it can push the market a bit to help the next person go into the next level. But at the moment, with all the other changes, um it's a bit of a perfect storm.
SPEAKER_00But we we've we've just spent the last few years with with them opening up the gates, you know, increasing the thresholds on on income and property prices to encourage more people to step in there and in ensuring that there's even more first-home buyers that could set themselves up into this position. And now we're seeing you know they're them setting up a market to potentially have a crash of you know five, ten, even more percent, who knows? And and we're seeing the banks set aside money in preparation for for these negative equity losses. Like the the the market shifts haven't even started to account for for what they've done in the first change, and now they're they're they're shifting again.
SPEAKER_01It goes a little bit even a little bit further, and I do need to declare that um Bluestone hasn't participated in um these schemes. But um a responsible response to a first home buyer getting in a little bit of trouble uh with a highly geared place is to maybe you need to rent it out for a little while, move back with mum and dad. But the s the way the scheme's structured actually put doing that puts the the scheme and the and and and the insurance uh for the lender at risk. So it's a really difficult situation.
SPEAKER_02Not everyone's in a position to move back with mum and dad. True.
SPEAKER_00I I I grew up three hours from the closest city, you know. I'm I moved to the city to live and and work, you know, you you leave your your safety net. Absolutely. You leave your safety net. And so you if you've then been, you know, you know, offered the the opportunity to get into the onto the property ladder with a five percent scheme, um, you know, and then you know, this this idea that that you're gonna be protected by the government, like they've got your back, uh, only to be turned around and and realize they're not there.
SPEAKER_01I just have a real concern for for people that have gone in um in in in into this scheme. And you know, I I hope hope we've done the thinking. I hope um we're prepared to be able to support them and and and we what we don't end up is is with a whole heap of fire sales on the market. Yeah.
SPEAKER_02But it does come down again to the overall affordability issue. How much of the household income has been going into service loans? Because we've seen an enormous growth in property values. Um and you know, has you know, has that been skewed as the the current pro changes which are going through, because they've been signed off um with you know that added sweetener of um SE um Resi SMS F lending being banned. Um you know we haven't seen the changes yet, but overall will it, you know, has it been the right shift? Is it too fast? Is it you know um I've always had a view that you know um a change like this potentially shouldn't be just bang overnight, rip the band-aid off hard, um you know, to to limit impact, it may have been over a ten-year period to bring things in.
SPEAKER_00But you know, with with with consult consultation that goes through with the with the industry. And I think that's that's a huge part of what's been missed here.
SPEAKER_01It's been universally criticized. You know, there's there's not not a hell of a lot of support there. And I want to jump on to what we think the impacts might be. Before we just move off from this this supply-demand um side of things, maybe a little bit wacky, a little bit out there, but um for for all sides of politics, novel idea.
SPEAKER_00Build some places. But Tony, you touched it on it touched on it earlier, right? You know, why are we not addressing that, you know, that elephant in the room that is the supply issues? But the problem actually really is is much bigger than anybody really wants to talk about. You know, we talk about the the approval process to to get places off the ground in the first place, then the the developments waiting on power and water supply, you know, the roads themselves, and then you've got the the skilled labor to actually get this work done. Have we got enough in the country to be able to build it? And then the supply chain issues that we've faced over the last you know six months, plus you know, the last you know, five to ten years we've seen issues prop up every every now and then. And it just creates this turmoil and a mess for anybody that thinks they want to build a home. You know, the the the supply chain issues are a huge part of it, and then all the way through to the planning processes and getting the the first, you know, the first slab, the the slab actually down on the ground. It's it's crazy.
SPEAKER_01I read an article earlier today that 22 departments get touched to get a development approval up. It's just my hand.
SPEAKER_00Thousands of homes waiting to to be approved. You know, customers sitting there waiting for an approval. Um, you know, and only to be sitting there waiting while we we face we we we face into a crisis that's inflated their their their costs hugely, and then they turn around, they want to build build a home and the costs are going up and they can't afford it anymore.
SPEAKER_02PVC piping's gone up by 30%. Yeah, you know, just that's your drain pipes, everything like that, you're plumbing the whole lot. That's just one part.
SPEAKER_00Who's gonna wear that cost? Because is it gonna be the customer at the bottom end or is it gonna be the the builder in the middle trying to get the materials to get to get a property off the off the line? Because the reality is someone's gonna have to wear it and you know who who knows, it's probably gonna be the taxpayer. So let's shift away.
SPEAKER_01I will last comment. Um I really think this is one of the great betrayals of the Australian people um in in in these changes, but it's a reality. We've got to live with it, we've got to adapt to it now. I'm bullish as to how markets do adapt to these sorts of things, and we've seen it over time. But in your spaces of specialist lending, of SMSF, how do you see this playing out?
SPEAKER_00I think in the in the specialist space, we're starting to see the the the flow through effects of of the inflation. Um, you know, the the the impact to to to households has has been very tough over the last few years, you know, having to go through very cheap interest rates and you know, you know, uh still facing into inflationary pressure, only to have the RBA turn around and and increase uh interest rates in the back end, which is then passing through uh extra costs through to them uh you know at the at the front end. We're now seeing a a market that's that's being turned on its head and and policies getting changed. You know, within a matter of weeks we're we're seeing property values drop. You know, mum and dads that that are sitting there with with with homes that are facing into negative equity. I think the specialist space all of a sudden is really gonna really gonna grow. You know, that we're gonna be looking for solutions left, right, and centre. Um in the construction space, that more complex um, you know, the customer or or investor over the last few years, you know, that they they might have been looking to go into that space. Now all of a sudden they might be priced out. You know, we're gonna have a hell of a lot more uh customers shift into that space. You've got first home buyers focused always as as building their their dream home. And and now you've got investors jumping in and pushing them out. So I think there's gonna be a lot more complexity uh in the in the specialists and specialty lender space. Um I don't know, but Cheszy, your space.
SPEAKER_02Oh, the SMSF world, wow, it's been turned on its head in uh you know in a matter of days, it's overnight. And I think we should we should we should put a clock on Chesie here though, because why keep it tight? Yeah, I but I look at it's um you know I think where a broker needs to be looking is to um a lender who can support them with knowledge through this time of change, it is change. And I was saying, you know, I actually I think when the budget changes came through, I remember having a coffee with Tony the next morning, yourself, and um and I I said, look, where when there's change, opportunity comes from that. And um and then I was having to say those same words to myself last week, and it is opportunity that comes from this, but from a lender's point of view and for brokers, you should be aligning yourself with the lender with the knowledge, the knowledge to support you and work with you through the situation the the position, and you want value, so value over price and the like because you you know everyone's gonna be competitive, but value is key today, and um consistency to deliver, so that's from a business point of view, but the opportunity is um yeah, people have to shift. Uh I think um you know I've always said that commercials are must in the SMSF lending space. Resi's been nice to have, it's disappointing to see it's um it's it's come to where it has. Um there's been a number of cases over the years seeking change. The Financial Systems Inquiry was looking to abolish it in 2014, maybe 15. Um, and there's another story there because you've kept me me uh on a short time frame here. But there are potential proposed changes there um which could have come in to soften the market. Unfortunately, we've seen it go so far. And I'll probably touch on later there. I think some of the um and I'm you know, I'm someone else's words sticking my mind when I say this, but um it's it's not it's so much an SMSF issue, it's been a behavioural issue in the market. We'll touch on that uh hopefully a bit later.
SPEAKER_00I think the the the other side to this budget is is the tax face. And we're already facing in, you know, in into the the end of the most recent financial year with over fifty billion dollars outstanding tax. You know, that's what the ATO is chasing. And all of a sudden we've got these shifts and changes to, you know, not only capital gains but also trust distributions and and other pieces that are stepped into the market over the last year, changes from the ATO that are that are gonna shift the way that tax is collected. Uh, and the the customers are gonna be facing into that in a huge way. So all of a sudden, accountants are gonna be seeing that on their desk even more, I I think. And for brokers, it's it's really about making sure they've got a safety net set up around them. You know, who who do they reach out to when they've got a customer that's got credit issues, or customer that's you know, sitting in that in that first own buyer space, or a customer that's got tax debt, customer that's got an existing SMSF loan. Do they know where to turn to? Do they know how to help? You know, who's their who's their accountant referral partners, who are their financial planners, who's helping them with tax debt, who are the lenders in their in their in their you know existing portfolio that they can turn to for assistance? You know, that relationship with the BDM once again becoming a really, really front of mind issue.
SPEAKER_01So again, despite governments trying to discourage wealth generation, it's never been more important to be close to a lender, to be close with a lender, your lender BDM as a broker, to see through the long term. And I'm bullish that investors will find a way moving forward, but there's a degree of uncertainty that we need to tread through um at the moment and uh and and and keep uh keep the faith. Guys, we've run out of time again. Um thank you for joining us, Ches Aaron. Always uh great catching up. And thank you for joining us again on It's a Broker Thing, and we look forward to seeing you in the next episode. That's a wrap of this episode of It's a Broker Thing, brought to you by Bluestone Home Loans. We love sharing ideas that help you stay ahead because backing brokers, well, it's a Bluestone thing. Hit subscribe and join us next time for more insights and stories that keep you in the know. This podcast is for general education only and isn't financial, legal, or tax advice. Guest views are their own. Bluestone accepts no liability for errors or how you use this information.