The Confidence Gap

Before the Weekend – Quick Bite – Antonia Mercorella, The Confidence Gap

Peter Schravemade:

Hi everyone, it's Peter Schravemade from BeforeTheWeekend.com podcast. I had to think about it for a second there. I'm missing my wingwoman, Kasey McDonald. She's not joining me down here in Melbourne.

Oddly enough, next to an REIV pillow, I'm sitting next to the CEO of the REIQ. That's a lot of REIs. REIV, yeah, there we go. Antonia Mercorella, CEO of the REIQ, who joined us in Episode One. We thought we'd have a bit of a chat today.

We're obviously one week away from the Federal Budget, which was released last week. You were on the show talking about a call for calm and not handing out investment advice. There were quite a few things we covered off last week, but I think, like we were talking about off-air before, you mentioned that a lot of the focus has been on the Federal Budget, but probably not on the larger issue at hand. Can you talk a little bit about that?

Antonia Mercorella:

Yeah, so I guess what we've been talking about is the focus of the Budget, which is, of course, improving home ownership rates for first-home buyers.

I think the thing that is universally agreed upon, whether you love the Budget or hate the Budget, is that helping create pathways to home ownership for first-home buyers is incredibly important.

It's a conversation that most of us, as parents or even grandparents, are having at the moment. There's concern about this entire generation feeling locked out of home ownership.

Peter Schravemade:

Yeah, and I suppose you and I are both in the scenario where we have offspring looking to purchase.

It's not just people in our space either. One of the things I was most disappointed about in the Federal Budget is the wedge it tended to drive between our generation and the one underneath us, or the two underneath us if you really want to look at that.

Because I think our generation is actually invested in seeing the younger generation enter the property market. Certainly from you and I, and even the people I talk to who may not have a house at the moment but are our age, they're incredibly concerned about how younger people enter home ownership.

So on that basis, is it just a supply and demand issue?

Antonia Mercorella:

I think what I'm disappointed about is that it's created this "us versus them" mentality, which shouldn't be what it's about.

Peter Schravemade:

But we've seen that before. We've seen landlord versus tenant. We've seen successive governments use a wedge to try and get a political opinion across.

Antonia Mercorella:

Well, I think, as I've said many times, the critical issue is supply.

But one of the things I'd like to talk about, which you and I were discussing off-air, is how we actually help people build confidence again so they know what that pathway to home ownership looks like.

For me, I talk a lot about the fact that we should be teaching kids about financial literacy and how to save from a much younger age. It's not something we do at school.

Our kids are probably more likely to learn through osmosis because of what we do. We're talking about housing all the time. My kids have learned a lot through me and through their father.

But I think schools have a role to play. I've been amazed at the number of really well-educated people who don't necessarily understand what's involved.

How do you go about saving? How do most young people understand they need a 20% deposit to avoid lenders mortgage insurance? I talk to lots of young people who say, "What is LMI?" or "I didn't know I needed a 20% deposit."

I don't even think people necessarily understand what stamp duty is, how significant it can be, or where the thresholds are so you can avoid it.

Peter Schravemade:

LVR, loan-to-value ratio, they don't understand that either. Not just LMI. Serviceability is another issue.

Antonia Mercorella:

Yeah, and even if you've been gifted money, that doesn't necessarily mean a bank will lend to you. They want to see evidence of your ability to save, as well as serviceability requirements.

These are conversations I don't think are necessarily being had well enough.

Peter Schravemade:

Should we go to a bank? Even that's a difficult one because every young person I've ever thrown at a bank has had trouble getting a loan, even if their parents have banked with the same institution for years.

Antonia Mercorella:

I think banks make assumptions and use a lot of language that can be intimidating and isn't necessarily understood.

So I think, as a starting point, those are things we should be teaching our kids at a much younger age.

The other thing we've been talking about is how challenging it can be for people to buy if they're single. There's a lot of evidence showing that buying as a couple, or buying with someone else, makes life easier.

Not everyone is in a couple, but one thing we're starting to see emerge, which I'm a fan of, is buying with another family member or with a friend. That can really help accelerate your chances of entering the market.

But when you do that, you need legal agreements set up in the background.

Peter Schravemade:

How does one do that? Do they just see a legal practitioner? I wouldn't imagine it's something a regular conveyancer would do.

Antonia Mercorella:

You definitely want to see a lawyer and think carefully about how you're buying the property.

Are you buying as tenants in common or joint tenants? What happens if one of you wants to sell? What happens if one of you doesn't meet the loan requirements? Who's responsible for maintenance and repairs?

All of those "what if" scenarios are really important.

Buying with someone else might only be a shorter-term plan. It could simply be an opportunity to build equity before moving on later.

You should absolutely talk to a lawyer about it, but it doesn't have to be overly expensive. It's generally a fairly templated process and money well spent.

Peter Schravemade:

Another thing I see causing difficulty for first-home buyers is the assumption that they need to buy where they work or in the suburb they like.

Back in the day, we had lenders telling us if we gave up one coffee a day we'd be able to save more.

Antonia Mercorella:

If you ate less avo on toast, you'd be right.

Peter Schravemade:

Exactly.

One of the first dwellings my wife and I bought was on the Gold Coast because housing there was incredibly affordable at the time, even though I was working in Brisbane.

For me, it meant two years of painful commuting, but was it the better idea for getting into the market? I definitely think it was.

Antonia Mercorella:

I think that's a really interesting point.

We're seeing more people understand they might not be able to afford their preferred suburb or preferred type of dwelling.

Rentvesting can be a really good option. Rent where you want to live or work, but buy in an area that's more affordable.

Again, we need to have conversations about how we help people get onto that first step of the property ladder.

Peter Schravemade:

Understanding market cycles is really important too.

With generative AI now so prevalent, there's enough data available for people to analyse suburbs and understand value differences between markets.

A four or five-bedroom home in Melbourne, Sydney or Brisbane might cost six or seven million dollars, but on the fringes or outer suburbs it's nowhere near that.

Even in Melbourne at the moment, inner-city units are really out of favour. Some are selling between $500,000 and $700,000. That could be the way to go.

Antonia Mercorella:

And there's so much more data available now than there was when I was buying.

As you say, the ability to analyse that data has become so much easier.

Peter Schravemade:

I saw an article today where economists were saying housing prices are coming down. I'm not sure I buy that. I can't see why that would happen when we're still short around 500,000 homes.

Antonia Mercorella:

It's interesting. We've just seen the Federal Budget announcement, we're dealing with global uncertainty and a cost-of-living crisis, so that can dent confidence.

But when I think about Queensland, where we live, it's difficult to see that being a long-term scenario when we still have extraordinarily high demand and insufficient supply.

Peter Schravemade:

Do you see any new forms of technology helping first-home buyers or people trying to get into home ownership?

Antonia Mercorella:

There are some good tools out there, but they're probably more about education than anything revolutionary.

There's lots of data available now. You can easily research first-home buyer incentives, stamp duty concessions and government support schemes.

It's less about earth-shattering technology and more about easy access to information and digital tools.

Peter Schravemade:

There is one app I've seen called ScaleApp.

The guy behind it, Nick Melrose, created it when his sister was unable to enter the housing market.

It's got excellent tools to help people build the financial position needed to purchase property.

Antonia Mercorella:

Sorry Nick, that is a great app.

Peter Schravemade:

He won the pitch battle you were a judge on.

Anyway, everyone's just broken for lunch, so we might call it quits here.

Do you have any final words for someone looking to get into the market?

Antonia Mercorella:

Look, my final word is this: I get it.

I have a 22-year-old and an 18-year-old who's about to turn 19, so I understand the sentiment and why people feel like there's no pathway.

But don't lose confidence. Talk to people who can help you and provide information.

You might have to start small and build your way up, but don't lose confidence.

Peter Schravemade:

Antonia Mercorella, CEO of the REIQ, thank you so much for joining us on Before the Weekend. Great to see you again.