Canstar: The Dream Is Alive
Hotspotting
Affordability is the most-debated and the most confused issue in residential real estate. While the rental shortage and rising rents occupies the minds of many, the property issue that occupies the most space most often in news media and in the minds of Australian consumers is housing affordability. It has been this way for years, indeed for decades. And while the so-called Great Australian Dream is often declared dead, with young people doomed to a lifetime of renting, the evidence suggests otherwise. I recently finished working on a report with financial comparison website Canstar which...
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The Art of Buying Against the Grain with Arjun Paliwal of Investorkit
Hotspotting
In this episode of the Hotspotting Podcast, Tim Graham sits down with Arjun Paliwal, the Managing Director of Investorkit and a two-time REB Buyers Agency of the Year winner. Arjun shares insights on his unique approach to property investment, focusing on "buying against the grain." Here are some of the key topics discussed: Episode Highlights: Introduction to Arjun Paliwal: Arjun kicks off by talking about his journey in the property industry, how he scaled Investorkit, and the importance of innovation in finding investment hotspots. The Concept of 'Buying Against the Grain':...
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Listing Leap
Hotspotting
Australian real estate has been characterised by three different types of shortage which have put upward pressure on rents and prices. Those are the shortage of rental properties, the shortage of new dwellings under construction and the shortage of homes listed for sale. While the shortage of rental homes and the under-supply of new homes persists, there has been recent improvement in the number of homes listed for sale by vendors. SQM Research finds that the number of residential property listings nationwide rose by 8% in August, bringing the total to almost 250,000 properties, up from...
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Airbnb Furphy
Hotspotting
State governments across Australia have no meaningful policies for easing the chronic under-supply of rental properties – but they do have a talent for using the rental shortage as an excuse to raise extra revenue from the housing market. One of the primary tactics they use is to scapegoat a section of the community and blame them for the problem that they, the politicians, have created – and then hit the demonised group with new taxes and pretend that they’re doing it to deal with the rental shortage. The worst offender in this regard, although not the only one, is the State Government...
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CoreLogic Illogic
Hotspotting
CoreLogic is one of Australia's leading sources of data on residential real estate matters, although increasingly overshadowed by other, smarter data organisations like PropTrack. CoreLogic has lots of statistics about housing markets but when it comes to analysis and commentary, CoreLogic is very often a source of illogic. Their problem, like so many companies that comment on Australian housing markets, is that they employ economists to analyse real estate and the outcome very often is kindergarten analysis. Here’s a recent example: According to , property markets outside the capital...
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Perth Property Shift
Hotspotting
Perth is moving into a new phase in its property boom, with more and more buyers opting for units as houses become more and more expensive. The latest sales data shows that the strongest markets in Perth are well-located locations with a major presence of attached dwellings. While the most popular house markets for home buyers and investors (mostly those at the affordable end of the market) are a little less buoyant than earlier in the Perth up-cycle, the focus is switching to affordable units. Perth started this boom with a reputation as the most affordable capital city housing market. After...
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Adelaide’s Market Surge
Hotspotting
Adelaide’s property market, one of the nation’s strongest in the past two years, has strengthened further recently. ales volumes shows that market activity in the June quarter was the highest for Greater Adelaide since mid-2022. The June Quarter sales levels represented a 25% increase on the March Quarter and were 10% higher than the same time last year. This is despite the reality that listings of homes for sale across Adelaide are the lowest at any time in the past 15 years, according to SQM Research figures. This continues Adelaide’s track record as a market with consistently...
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Investor Market Share
Hotspotting
One of the greatest misconceptions in the housing market is that property investors are the people who cause property prices to rise. The evidence confirms that this is a major piece of misinformation but some sections of politics and news media love to perpetuate this fiction. And, as an extension, use it as justification for advocating the end to negative gearing. Some people appear to believe that eliminating negative gearing tax benefits will fix all the problems in the property market: rising prices, housing affordability generally, the shortage of new homes, the rental crisis, pretty...
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Exodus Trend 2024
Hotspotting
The trend we call the Exodus to Affordable Lifestyle is among the most powerful forces impacting real estate markets across Australia. It’s a trend that been around for at least the past 10 years, with more and more residents of the biggest cities relocating to smaller cities or regional areas in search of a different and more affordable lifestyle, empowered by technology which allows many people to work remotely. It was NOT created by the Covid lockdowns. It was under way long before Covid appeared in 2020 and it continues to have considerable momentum now that we are well beyond the...
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Poll Fixing Crisis
Hotspotting
Top economists are unanimous in believing Australia's housing market is in crisis, according to a new poll. And I have to say, Wow, we had to go to a group of “top economists” to achieve that startling revelation. It comes from a survey in which the Economic Society of Australia offered these top economists a choice of 14 measures identified by as likely to restrain prices for buyers and renters – in other prevent property prices and rents from continuing to rise. Therein lies the first problem: they polled economists rather than real estate experts. If there’s one thing we’ve learnt...
info_outlineContemplate this scenario: you buy a capital city house for $380,000 and a year later it has a market value of $530,000. Up 40% in 12 months, providing a capital gain of $150,000.
Or this one: you paid just $240,000 for a house in a regional centre and a year later it’s worth $325,000 – up 35% in 12 months. And you’re getting a rental return above 7%.
A third example is paying $380,000 for a house in a capital city and watching it grow to $480,000 in 12 months. Meanwhile, rents have grown 25% in your suburb, underpinned by a vacancy rate of 0.4%, and your rental return has increased from around 6% initially to well above 7% a year later.
These are some of the scenarios to emerge from our analysis of the 50 locations in the special report, The Pulse, published quarterly by Hotspotting in conjunction with depreciation experts Washington Brown.
That 40% capital growth scenario has occurred in the Perth suburb of Hillman, which has benefited from the extraordinary price increases experienced in the Western Australian capital in the past 12 months.
The 35% leap in values happened in the little-known NSW regional town of Moree, where values have been boosted by construction of Australia’s biggest national infrastructure project, the $35 billion Inland Rail Link which spans the three major eastern states.
The third scenario relates to Elizabeth East in the northern suburbs of Adelaide, a precinct heavily targeted by first-home buyers and investors for its affordability, good amenities and proximity to major employment nodes.
These and other outcomes in locations featured in our report in the past year demonstrate one of the fundamental philosophies that underpins our recommendations to investors:
Contrary to a popular real estate theory, you don’t need to choose between capital growth and high rental yields. If you select your location well, you can benefit from both.
The 50 locations featured in The Pulse report are chosen because they offer above-average rental yields – but we also require our nominated locations to have the credentials for capital growth.
Of the 50 locations in the current edition of the report, 48 have recorded growth in their median prices in the past 12 months – including 30 with capital growth above 10%.
The top 10 have all had price rises well above 20% - in addition to providing superior rental yields.
But the truly outstanding markets are the ones with exceptional growth in both prices AND rents.
Consider these examples.
Firstly, Armadale in WA.
Before Perth’s boom convinced investors that any house in Perth was a good buy, few people wanted to buy in downmarket Armadale. Now it’s flavour of the year for those seeking a cheap house with high growth prospects. The data for the past year is extraordinary, with the median price up 35% and rents up 28%. The median is now $460,000 but you can still get 6% yields.
Then, there’s Carey Park, WA: This affordable suburb in the key regional city of Bunbury has become a sought-after location for investors seeking low entry prices and high rental yields. Those who followed our advice and bought there a year ago would be happy: the median house price has jumped 22% and rents are up 23%. The median price is still under $400,000 and rental yields remain around 7%.
What about Murray Bridge, SA: Regional South Australia seldom features in the national discussion about real estate growth but it has excelled in recent years, led by Murray Bridge, where both the median price and the median rent for houses have risen 20% in the past 12 months. Vacancies are ultra low at 0.4% and, despite the growth of the past few years, the median price remains within reach of most buyers at $430,000.
And then there’s Woodridge, QLD: This is another unfashionable option which has nevertheless out-performed. Typical units in this southern Brisbane suburb now cost above $300,000 following annual median price growth of 24% - and, with rents also rising 16%, investors can find yields between 6% and 7%, with the vacancy rate around 1%.
There are many other examples like these on our list of 50 key suburbs which we have listed for their superior rental yields AND potential for capital growth.
And they’re all affordable places that should fit within the budgets of most investors.