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Good News Bulletin 10 February 2021

Hotspotting

Release Date: 02/11/2021

Melbourne Property Growth show art Melbourne Property Growth

Hotspotting

There are numerous reasons why we think Melbourne and Victoria is worthy of consideration by property investors, notwithstanding the concerted efforts by the state government and some local councils to force investors to sell up and get as far away from Victoria as possible. Melbourne and Victoria are underpinned by one of the nation’s strongest state economies, according to CommSec’s State of the States report, and there has been a notable uplift in sales activity since the start of 2024, pointing to elevated price growth as the year unfolds. But perhaps the most compelling evidence,...

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First-Home Buyers vs. Investors in the Property Market show art First-Home Buyers vs. Investors in the Property Market

Hotspotting

Media loves the storyline that first-home buyers are competing with wealthy investors for properties – and losing because investors apparently have a huge advantage. Like so much that’s written and spoken in news media about the housing market, it’s a work of fiction. The polar opposite is, in fact, the truth. The biggest competition for first-home buyers in the market is not investors, but home buyers other than first-time buyers. The largest cohort in the market, at any point in time, is home buyers who already own a home, have equity in that home and are upgrading – or, in some...

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Location Reports: Your Real Estate Game-Changer! show art Location Reports: Your Real Estate Game-Changer!

Hotspotting

If you want to sell real estate, very often the greatest selling point is the location. If the location has  … a strong diverse economy creating jobs,  a steadily growing population with strong increases projected well into the future, good existing amenities and a significant spend on new infrastructure … then it has many of the credentials for capital growth. The problem for many real estate professionals - in taking advantage of growth factors like that in their location- is accessing all the key information, analysing it and then presenting it in a way that’s easily...

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Webinar Replay - Why Melbourne Makes More Sense Than Perth show art Webinar Replay - Why Melbourne Makes More Sense Than Perth

Hotspotting

Want to get into a key market BEFORE prices start to take off? Feel that you may have missed the boat with media favourite Perth? In many ways, the answers to these questions are the essence of smart investing. Most property investors are herd animals, diving into markets when they read that prices have risen 15% or 20% in the past year – or 50% in the past three years.  Buying in such a market means you are likely buying at – or after – the peak of the market. The smart money would have been there 2-3 years ago – and is now focused on places that are early in the growth cycle....

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Interviews with the 1% - Arjun Paliwal of InvestorKit show art Interviews with the 1% - Arjun Paliwal of InvestorKit

Hotspotting

Are you ready to take your investment journey to the next level? Look no further, because we have exciting news to share with you! We are thrilled to announce our new Hotspotting pre-recorded interviews with some of the top 1% of Australian investors who own 5 or more properties. As you may know, in the 2020-2021 financial year, only 0.87% of investors in Australia owned 5 or more investment properties. But what do these successful investors know that the majority don't? We have sat down with a number of them to get exclusive insights into their strategies, tips, and personal journeys. Our...

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Real Estate Influence on RBA show art Real Estate Influence on RBA

Hotspotting

Part of the obsession by economists with interest rates as the only thing that matters in the housing market is the notion that the Reserve Bank spends a large amount of time discussing the housing market before deciding what to do about interest rates. As with so many things, economists are wrong about that. One of the most popular definitions of insanity is doing the same thing over and over again, but expecting a different result. My own definition of insanity is the average Australian economist discussing real estate. In essence, those two definitions are essentially the same thing....

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First Home Buyer Activity show art First Home Buyer Activity

Hotspotting

If you tune into news media regularly, it’s easy to form the view that the prospect of young Australians buying real estate is remote, if not impossible. There are daily headlines telling us that it takes 10 or 15 years to save a deposit, or that most young Australians have given up on home ownership and that young adults are doomed to a life-time of renting. As is so often the case with mainstream media and their love of negative sensation, the reality is quite different. First home buyers are highly active in markets across Australia. But first, let’s look at some of headlines with which...

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Home Building Costs show art Home Building Costs

Hotspotting

Want to know why housing affordability is so poor in this country?   The answer, in simple terms, is because the cost of building new houses is so high – ridiculously, obscenely high.   The cost of building the typical house in Australia has risen 53% in the past three years – and it now costs close to half a million dollars to build that home.   And that’s just the cost of the house. It doesn’t include the price of the land.   Who’s to blame for this situation?   Primarily, overwhelmingly, it’s government. Politicians and bureaucrats.   They keep...

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Regional vs. City Growth show art Regional vs. City Growth

Hotspotting

We’re constantly asked at Hotspotting whether it’s better to invest in the regions or the capital cities – and whether you get higher capital growth in the outer-ring suburbs of our cities or the so-called prime inner-city locations. Now, there’s no definitive answer to questions like that, because there are so many different scenarios to consider – and, at the end of the day, it comes down to the performance of individual local markets and you simply cannot generalise. But, based on the evidence of where the highest capital growth has occurred in the past four years, I would have to...

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Victorian Markets show art Victorian Markets

Hotspotting

The smart money in real estate buys in key markets BEFORE prices start to take off. The essence of smart investing is NOT buying in over-heated markets like Perth but targeting locations that have the credentials for long-term growth but are currently at a low point in the cycle. And right now, the location that meets those criteria better than most is Victoria, particularly Melbourne. Most property investors are herd animals, diving into markets when they read that prices have risen 15% or 20% in the past year – or 50% in the past three years. Buying in such a market means you are likely...

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More Episodes

Here’s how you spot a real estate charlatan, someone who likes to present themselves as a real estate expert but who in reality knows nothing worth hearing …
1. They speak of Australia as a single property market; and/or
2. They attribute price growth to “record low interest rates”
Mostly these pretenders are economists. I would remind you of a much-quoted definition of an economist: Someone who can tell you tomorrow why their predictions yesterday didn’t come true today.
We have learnt over the years, but particularly in 2020, that the bigger the name and the media profile, the worse they are at analysing residential real estate and forecasting outcomes.
Cast your minds back to the predictions in March/April 2020 from senior economists employed by the major banks, big institutions like AMP and even those working for specialist real estate research entities. And then again later in the year when the so-called
September Cliff was proclaimed an impending disaster.
There was a chorus of predictions of a long recession, with double-digit unemployment and real estate values collapsing. How spectacularly wrong they were. Only the specialist property analysts got it right.
But the appalling track record of economists with real estate analysis stretches back years and includes the alarmist predictions about property prices in the wake of the GFC – also proven to be spectacularly wrong.
It’s remarkable that media continues to give these charlatans airplay. Credibility, it seems, is optional, so long as you have “economist” in your title. So the nation’s gaggle of chattering economists has been compelled to admit they got it wrong in 2020 and most of them are now forecasting big price growth this year. You will note that what they are predicting is already happening, highlighting another characteristic of this bloated and overblown profession: predicting the recent past.
And how do they explain the gathering boom? Record low interest rates!
God help us. The lack of expertise among the talking heads who clutter up the airways with their simplistic analysis is quite breathtaking.
As we all know, we’ve had ultra-low interest rates for years. Very little has changed in that regard to explain the recent uplift in sales activity. When Sydney and Melbourne were having their real estate boom from 2013 to 2017-ish, economists generally explained the price rises with “record low interest rates”. They had no response to the obvious question at the time: how come prices in Perth and Darwin were falling, while Canberra, Brisbane and Adelaide were stagnating?
The “low interest rates = property boom” theory also fails to explain why the last two genuine nationwide property booms, in the late 1980s and in the early years of this century, both occurred during periods of very high and rising interest rates.

My view, strongly, is that record low interest rates do not explain what’s happening in real estate across most of Australia.
The growth is being fueled by multiple factors, including …
 A stronger-than-expected economy
 Lower-than-predicted unemployment
 State and federal stimulus measures
 The build-up of savings during the pandemic period
 People in lockdown reviewing their life choices
 Ultra-low vacancies, putting upward pressures on rents and prices
 Pent-up demand, leading to rising sales activity
 Low listings levels, relative to rising buyer demand
 The Exodus to Affordable Lifestyle trend, which is hugely influential
 Increased spending on major new infrastructure
 The revival of the resources sector
 The return of ex-pat Australians in large numbers
 The belated entry of investors to compete with owner-occupiers
 Perceptions about the safety and solidity of bricks & mortar in times of uncertainty
 The growing prevalence of e-commerce and its impact on industrial property, which
has repercussions for residential demand
 Access to low-cost finance
And you’ll notice that I mention low interest rates as just one of 16 different factors – and I mention it last and definitely least.