Hotspotting

Prepare to embark on an exciting journey into the realm of hot property markets with Terry Ryder and Tim Graham! Terry & Tim from Hotspotting, are dedicated to providing the most accurate and unbiased research to help investors make informed decisions on where to buy. The Hotspotting Podcast brings you the latest data, trends, and market statistics, along with in-depth discussions on growth areas and the larger factors impacting Australia's property landscape. Terry & Tim regularly feature special guests from around Australia to share their industry insights and expertise to help investors cut through the noise. Whether you're a seasoned investor or a first-time buyer, this show is a must-listen for anyone looking to build their knowledge and make smarter investment choices. Terry Ryder, with over 35 years of experience as a specialist researcher and writer in residential property, offers expert insights that are completely independent and free from outside influences. Tim Graham has been a buyers agent and mortgage broker for over 13 years along with working in real estate all over the world. Join us on the Hotspotting Podcast and discover the hottest opportunities in the Australian property market today!

Vacancies Set To Remain Low For Years 07/22/2024

Vacancies Set To Remain Low For Years There really is no realistic prospect of rental vacancies rising significantly any time soon, which is grim news for tenants in most parts of Australia. Vacancy rates continue to be close to those historic lows that have become the norm in the past couple of years and I can’t see any way they will improve in the foreseeable future. The politicians who have created this unprecedented shortage of rental properties are clueless about how to fix their mess – and most of their actions which impact on the situation make it worse, not better. The latest data on vacancies nationwide – from one of the key sources, SQM Research - has the national vacancy rate at 1.3% in June, the same as it was a year ago. We still have capital cities with vacancy rates well below 1%, including Adelaide, Perth and Darwin. That June vacancy rate was slightly up on the rate for May, but that’s attributed to seasonal factors. Here’s what Louis Christopher, managing director of SQM Research and one of Australia’s most experienced and respected research analysts, says about the current situation and about the future of vacancy rates: “Based on history, we have now reached the peak in rental vacancy rates for Winter. It is likely that, vacancy rates will now begin to tighten again and keep tightening until November. “So far this year, we have recorded very similar vacancy rates compared to the same period in 2023. “Overall, the national rental market remains in severe shortage and barring some exceptions, is not expected to materially soften out of the rental crisis for some years.” So what does this mean for residential rents? Well, it doesn’t necessarily mean they are going to continue rising at 10% or more per year. While vacancies are set to remain dangerously low for some time, there is a ceiling beyond which rents can’t rise because to the capacity of tenants to pay. Louis Christopher says: “Much of the structural rental shortage has now been priced into the rental market and so I do believe the days of 10-20% plus annual rental increases have come to an end.” I agree. Tenants, who tend to have lower incomes, have had years of rising rents and they can’t keep paying more and more in rent, in times when they’re also paying more for food, electricity, petrol and other essentials. But the situation of ongoing ultra-low vacancies does mean that rents won’t fall. They will remain at the current high levels for the foreseeable future. /episode/index/show/hotspotting/id/32239362

Shortage Crisis To Drag On 07/22/2024

Shortage Crisis To Drag On There will continue to be upward pressure on prices and rents for the foreseeable future, with no end in sight for the imbalance between supply and demand in residential property markets across Australia. National valuation firm Herron Todd White reports that, nationally, home prices have increased for 17 consecutive months and the median home price is now $784,000. According to Oxford Economics, the nation’s housing supply and affordability crisis is likely to deepen and will remain a “chronic” issue for years to come. Oxford Economics is predicting we will fall well short of the Federal Government’s ambitious plan to build 1.2 million new homes over the next five years. A new report from the firm, Building in Australia, forecasts just 960,000 new homes will be built between now and 2029, well short of the 1.2 million target in the government’s National Housing Accord. The figures underline industry fears that it will struggle to keep up with an ongoing population rise fuelled by a wave of new migrants – and also not helped by labour shortages, dysfunctional planning systems and high construction costs. The report author Timothy Herbert, Oxford Economics head of property and building, says while new housing construction could well reach record levels by the end of the decade, it wouldn’t be enough to keep up with demand. Herbert says: “While industry capacity is showing signs of improvement in some areas, labour shortages remain that will place a speed limit on the early to mid stages of the recovery.” But he also says: “We will continue to experience a dwelling stock deficiency, but activity will inevitably recover in the residential sector. All build forms will contribute, driving total dwelling commencements to a new record level by the end of the decade. “Attached dwellings are forecast to join the upswing from FY2026 with support from falling interest rates, the upward rebasing of rents, co-ordinated social housing investment, and planning tweaks in key markets. Build-to-rent development has risen to around one-fifth of apartment starts and is expected to grow this share a little further through the late decade.” This report adds to the views of many others that the Federal Government’s stated goals for housing construction were never realistic and had no chance of being achieved – and therefore the shortage would not be adequately addressed, keeping pressure on prices and rents. The Housing Industry Association earlier this month warned the government would fall short of its housing targets by 64,000 properties in the first year alone. To reach the 1.2 million target by the end of June 2029, an average of 240,000 homes need to be built each year, a level that has never been achieved in the nation’s history. Only 963,000 new homes were completed over the past five years despite the pandemic HomeBuilder stimulus, which sent building levels to record highs. The HIA is calling for tax relief, planning reforms and incentives to attract more workers to the industry in order to avoid what it predicts will be a 180,000-home shortfall over the next five years. And the Government-appointed independent advisory body - the National Housing Supply and Affordability Council - has also shot down the government’s targets, estimating a homes shortfall of almost 300,000. It suggests the private market will only be able to supply 903,000 new homes to 2029. /episode/index/show/hotspotting/id/32239352

Biggest Growth In 3 Years 07/22/2024

Biggest Growth In 3 Years Real estate consumers tend to place their attention on the markets receiving the most media headlines, which primarily are the ones that have shown the biggest growth in the past month or the latest quarter or year. But that is not the best measure of which locations have been showing the best growth. To get a better picture of locations that out-perform, you need to look at longer time frames, such as the past THREE years, not the past week or the past month as media tends to do. News media continues to obsess over the Perth market where prices currently are rising the fastest and they tend to imply that this boom will keep on rolling for years to come. It won’t. Perth has already had a couple of years of major price growth and there are already signs that the market has peaked. One of the things that would be more useful is for the media to take a broader focus of price performance, to give consumers a more enlightened picture of where the best growth has been. For example, where in Australia have we seen the biggest growth over the past three years? It would no doubt surprise many to learn that there are a dozen regional centres across Australia which have had considerably higher growth since 2021 than Perth – and most of the other capital cities as well. Research published by one of Australia’s best real estate analysts, Simon Pressley of Propertyology, shows that the best performers on capital growth over the past three years have been regional cities - and that the best of the capital cities has not been Perth, but Adelaide. So which location has recorded the highest growth in median house prices in the past three years? According to Propertyology, the answer is Bundaberg in Regional Queensland, where the median price has risen 63% in three years. Close behind comes Wagga Wagga in NSW, which has grown 56%. Then we have little-known Gympie near the Sunshine Coast, up 51%, alongside Hervey Bay a little further north in Queensland, which also increased 51%. In fifth place we have the first of the capital cities, Adelaide, which is up 50% on the pricing levels of 2021. Next, in order, we have the Sunshine Coast in Queensland, Mandurah in WA, Rockhampton in Queensland, Tamworth in NSW, the Gold Coast in Queensland and Albury-Wodonga at the NSW-Victoria border. In 12th place, up 40% over three years, is Perth. Now, I’m happy to report that every one of those out-performing locations across the nation have featured strongly in our hotspots reports over the past 3-4 years. And we featured them BEFORE that big period of three-year growth started. In the 2020 editions of our National Top 10 Best Buys report, the Sunshine Coast was our top pick – and went on to be a national leader on price growth over three years. In the 2021 editions of Best Buys, Bundaberg, Tamworth, Albury-Wodonga, Wagga Wagga and the Gold Coast, as well as key locations in Adelaide and Perth, all featured in our national top 10 lists – BEFORE the three years of growth happened. And remember that, back in 2020 and early 2021, economists and the media generally were telling us that prices were going to crash everywhere. We simply did NOT agree – and we got it right. This speaks to the essence of intelligent investing – accessing good research reports that tell you where the highest growth will happen BEFORE it happens. NOT diving into markets where the media says prices have grown the most in the past year. That is the essence of BAD investing. /episode/index/show/hotspotting/id/32239332

How To Create A 6 figure Passive Income Safely Webinar Replay 07/17/2024

True Cost of Housing Taxes, Fees and Charges 07/17/2024

True Cost of Housing Taxes, Fees and Charges For a long time I have argued that housing is expensive in Australia because politicians have made it so – AND keep making decisions that add to the cost. The value of all residential real estate in this country is under-pinned by the cost of creating new dwellings – and those costs keep rising, way beyond the rate of inflation. One of the biggest elements in the cost of new homes is the taxation component. The research shows that a massive share of the cost of creating a new dwelling in Australia is taxes, fees and charges at all three levels of government. The Federal Government, the various state governments and local government authorities all use residential real estate as a cash cow – in other words, they milk it for revenue. Over the past 5-10 years, there have been a number of research reports which quantified how much of the cost of new dwellings comprises government imposts. Some of that research has come from the building industry and some have been independent research reports by credible organisations. And they have all arrived at similar conclusions: that somewhere between 30% and 50% of the cost of a new home in Australia is taxes, fees and charges at the three levels of government. Why is it 30% to 50%? Because the percentage differs depending on location. And now that reality has been confirmed by a new research report by the Property Council of Australia in Queensland – which has found that one third of the cost of new homes and apartments in that state is made up of government charges. The report says: “The Queensland Government’s promise of delivering ‘a home for every Queenslander’ cannot be fulfilled under the current tax model.” The ‘Stacked Against Us’ research report shows that government taxes, fees and charges make up 32 per cent of the total cost of a new house and land package in Queensland and 33.3 per cent of a new apartment. For a $730,000 mortgage, that equates to $233,440 in taxes, fees and charges. The report says: “The impact of these tax settings is seeing Queenslanders spend the first nine years of a 30-year mortgage package paying off prohibitive taxes, fees and charges – plus interest.” And the report also says: “Queensland is in the grips of a housing affordability crisis. A key reason why houses aren’t affordable is the increasing burden of taxes and regulatory costs in the development of new houses and apartments. “Taxes on new homes are a double whammy – they increase costs (and therefore sale price) of new builds, in turn increasing the costs of buying or renting established homes.” The report points out that, over the past three years, the Queensland Government has experienced a $3.5 billion in windfall transfer duty receipts alone - representing a 29 per cent increase in receipts above the forecast level. The situation in Queensland is being replicated across Australia. It’s worse in New South Wales. In Sydney, the taxation component of a new dwelling on a block of land can be as high as 50%. It’s becoming diabolically bad in Victoria, which has by far the highest taxes on residential real estate of anywhere in the nation. The message to politicians is clear: if you really want to create affordable housing, as you say you do, stop treating the process of creating new homes for Australian families as a cash cow. /episode/index/show/hotspotting/id/32174287

Drop in Listings of Homes for Sale 07/17/2024

Drop in Listings of Homes for Sale Economists don’t understand residential real estate very well and they’re scratching their collective heads over why prices keep rising when interest rates are high. Here’s a couple of simple things to help them out: one is that, historically, there’s no evidence that rising interest rates lead to falling property prices. There’s nothing unusual about what’s currently happening in Australian property markets. But the key factor is that we have very high demand for real estate, fuelled by record population growth, at a time of incredibly low supply. The rental shortage is well documented. But another statistic that depicts under-supply is the incredibly low level of listings in many parts of the nation. The number of homes for sale is at dramatically low levels. In June, the number of national residential property listings decreased by 8.3% compared to May. Part of that was a 13% decline in the number of new listings of homes for sale, according to SQM Research. Notably, all major cities experienced a decrease in their listings in June. recorded the largest monthly decrease in total listings, falling by over 15%. and followed, both recording decreases of 12%. Perth recorded the largest annual decrease of 32%, while Adelaide, Brisbane and Darwin also had big falls in the number of homes for sale. The data on listings correlates generally with the results we are seeing with prices. The cities with the biggest declines in the number of properties for sale – Perth, Adelaide and Brisbane – are the ones with the major escalation in prices. Cities where listings remain higher than a year ago – like Melbourne, Canberra and Hobart – are the weakest performers on price growth recently. In Melbourne, for example, listings are 12% higher than a year ago. It illustrates, yet again, that we don’t have a single property market in Australia, but lots of local markets doing different things. And it also shows that supply and demand factors will override other issues, such as high interest rates. A new factor now coming into the equation is the Federal Government’s tax cuts, which are likely to add to demand and put further upward pressure on prices by increasing borrowing capacity. According to an analysis done by Shore Financial, borrowing capacity would increase by 4% for those with an income of $90,000 and 5% or more for those with an income of $100,000 or more. According to Mortgage Choice, the borrowing capacity of a buyer with a $100,000 income could increase by about $25,000 while someone earning $150,000 could borrow about $37,000 more. In the meantime, the capacity of Australians to cut through all the barriers and buy real estate is shown in the lending figures – including the rise in the size of the average loan, which now sits at $625,000. Sally Tindall, research director at comparison website, RateCity.com.au., says this: “Over the last two years, buyers have seen their maximum borrowing capacity plummet, in some cases by hundreds of thousands of dollars, as a result of the RBA hikes, and yet the average new loan size has hit a new record high. Tindall says: “It’s astounding to think owner-occupiers are, on average, taking out larger loans than ever before, despite the fact the cash rate is sitting at a 12-year-high.” Maybe it’s not so astounding, given that demand from owner-occupiers and from investors remains high and supply continues to be low, putting further upward pressure on prices. /episode/index/show/hotspotting/id/32174237

Brisbane and Queensland 07/17/2024

Brisbane and Queensland Brisbane and Queensland increasingly are emerging as the property market destination with leading metrics pointing to out-performance in real estate. A couple of months ago Hotspotting published its annual report with Australia’s largest comparison website Canstar - the one we call Rising Stars – which analyses the capital city and state regional markets across Australia and ranks them for future growth prospects based on five key metrics. And the leading market jurisdiction to emerge from that process was Queensland, including both Brisbane and Regional Queensland. The Sunshine State has also, more recently, achieved nation-leading status in the latest population data published by the ABS. Finance data also confirms an increase in loans to both owner-occupiers and investors, with the average loan size in Queensland at an all-time high. In the Rising Stars report each year, we use five key metrics to rank the 14 major market jurisdictions in the nation - the eight capital cities and six state regional markets. The report with Canstar ranks the 14 market jurisdictions from 1 to 14 on their prospects for growth in the coming year. The 2024 edition of Rising Stars ranked Brisbane No.1 - the market with the best prospects to provide growth in the next year or so. And the No.1 regional market in the nation, using this methodology, was Queensland. Brisbane was a standout on all the five metrics we used to arrive at our ratings - sales activity trends, recent price movements, vacancy rates, rental growth trends and infrastructure spending. Regional Queensland ranked in the top 4 nationally on three of the five metrics and it also produced solid ratings on the others. The trend we call The Exodus to Affordable Lifestyle is still pumping, with large numbers of people relocating from the biggest cities to regional areas in pursuit of a different lifestyle at cheaper prices. The latest data and analysis from a range of sources, including the ABS, Regional Australia Institute and real estate data company CoreLogic, confirms that this remains a major demographic force, with significant consequences for real estate. And Queensland is the national leader in this category, gaining the most of any state or territory from internal migration in 2023 – that’s people moving from one part of Australia to another. The only other state or territory to achieve a net gain in its population from internal migration was WA. All others were net losers – which means many Australians are relocating and most of them are going to Queensland for its climate, lifestyle and relevant affordability for homes. This is being reflected in the price data. According to PropTrack, Brisbane unit prices have increased 17% in the year ending 30 June, while Regional Queensland rose 12% - while for houses, Brisbane rose 14% and Regional Queensland 11%. This ranks both Brisbane and Regional Queensland among the best in the nation on capital growth – and the key factor is that all the indicators suggest that the out-performance of Queensland markets, generally speaking, is set to continue. /episode/index/show/hotspotting/id/32174217

Household Wealth 07/08/2024

Cheapies with Prospects 07/08/2024

Cheapies with Prospects Investors come to property markets in many different shapes and sizes, but our observation is that most are seeking a level of affordability. The official data shows that most Australians seeking to buy investment properties are not wealthy, with most having incomes below $100,000, and most have just one property or are buying a rental property for the first time. This dictates, for many, a purchase somewhere in the range from $400,000 to $600,000. Fortunately, there continue to be options in regional Australia where buyers can access houses in this price range in locations which have good prospects for future capital growth. Our day-to-day research shows that investors can buy in regional areas at affordable prices, achieve above-average rental yields and look forward to good price growth. That old attitude that you have to make a choice between strong capital growth or high rental yields is one of the great misconceptions of residential real estate. If you choose your location well, you can have a good combination of both. Those seeking to buy in that price range between $400,000 to $600,000 can still find possibilities for houses in the cheaper areas of some of our capital cities – and, increasingly, investors who are aware of the current trends can find good options in the market for units and townhouses. In cities like Brisbane, Perth, Adelaide and Melbourne, you can buy units in inner-city areas in that affordable price range. The rise and rise of apartments and townhouses as the dwelling of choice for many important cohorts has meant that attached dwellings are increasingly challenging detached dwellings on capital growth, while providing cheaper buy-in prices and higher rental yields. So, how can you find out more about the possibilities? By reading our new Cheapies with Prospects reports. We have two editions of the Cheapies reports – the city edition and the regional edition – and in these reports the key criteria are that the locations have affordable options and the credentials for capital growth. The new editions are available now and provide clues to the places you can look to find that precious combination of affordability, good rental yields and potential for growth. /episode/index/show/hotspotting/id/32043372

The Current Lending Landscape with Lucky Velasquez - Webinar Replay 07/05/2024

It's Not All About FHBs 07/02/2024

It's Not All About FHBs The unfortunate reality is that the core problems afflicting housing markets don’t get fixed because politicians don’t understand the problems AND they’re unwilling to consult with the people who do. If a state government gets the message that’s there’s a serious rental shortage, the only response will be to announce they’re going to build a million new dwellings over the next 10 or 20 years – which doesn’t address the core issue at all and is unlikely to ever be delivered anyway. Politicians are incapable of coming up with anything else as a response to an immediate and pressing issue. If a state government gets the message that housing affordability is a big issue, the only response will be to announce grants or stamp duty concessions for first-home buyers. This, too, does not address the core issue – the high cost of housing in Australia and in particular the ridiculously high cost of building new dwellings – but it’s all they have in their kit bag of ideas. And this speaks to one of the core issues for the dwelling industry – politicians appear to believe that the only people in society who deserve any consideration or assistance are first-home buyers. And that’s reflected in the state and territory budgets delivered recently: a number of governments have announced measures to assist first-home buyers. Tasmania has decided that first-home buyers will pay no stamp duty on a home costing less than $750,000. South Australia has announced a similar measure, while Queensland says it will provide stamp duty discounts for first-home buyers paying less than $700,000 for a home. From the viewpoint of first-home buyers, that’s better than nothing but it doesn’t address the very high cost of dwellings or the shortages that are causing prices and rents to rise. And it doesn’t help anyone other than first-timers. What about other real estate consumers? What about second-time buyers? What about downsizers? What about investors who supply 90% of the homes that people rent, where there’s a chronic ongoing shortage. Consider second-time buyers. They might be a young couple who bought a small apartment as an affordable first dwelling. But now they’re starting a family and need to upgrade to a larger home. There is no assistance and no concessions for them. The costs of selling and buying elsewhere are huge, with stamp duty a massive impost. Politicians have often made statements urging older Australians to downsize – to sell the family home now that the kids are adults and have moved on, and make those family homes available to young buyers. Apart from the daunting prospect of moving house, the big issue that stops many people from downsizing is the hideous cost of selling their home and buying elsewhere. Based on the national median price for a house, the total costs of relocation can be around $100,000 – with a huge chunk of that being stamp duty on the purchase of the next home. But most state and territories don’t recognise this reality. Tasmania is an exception. It has a 50% stamp duty concession for pensioners downsizing. If politicians were genuine and fully understood the issue, stamp duty would be abolished for downsizers. And then we have investors, that cohort that politicians and journalists like to vilify and demonise – and misrepresent as greedy rich bastards ripping off the system. The reality is that the typical investor buyer is young, earning less than $100,000 and is buying for the first time or owns one other property. Landlords are in short supply and people need to be encouraged and incentivised to buy properties and make them available for long-term rental. Right now, there are no incentives to take on that very big risk and burden in the hope of making gains in the future. There are many, many disincentives, including land tax, capital gains tax, onerous state laws favouring tenants - and escalating costs, including interest rates, insurance premiums, council rates and maintenance costs. These people need and deserve financial incentives – and, given that investors usually pay more in stamp duty than home buyers, it would be both wise and fair to provide stamp duty concessions or exemptions to investors to encourage more rental supply. But don’t hold your breath. The thought would never occur to politicians, who appear to believe that the only cohort in the community that warrants assistance with the high cost of dwellings is first-time home buyers. /episode/index/show/hotspotting/id/31972402

Latest Population Data 07/02/2024

Latest Population Data One of the core reasons the national shortage of dwellings is so serious is that it coincides with a record increase in the nation’s population. The latest data shows that Australia’s population grew 651,000 in 2023, the highest number in the nation’s history. 84% of that growth was attributed to overseas migration. Now, the record level of population growth last year did NOT cause the shortage of dwellings including the under-supply of rental homes. The seeds of the shortage were sewn years earlier by bad government policy and have been exacerbated by bad governance every year since. But that very high level of population growth has made a serious problem more dire. Australia now has a population of 27 million, up 2.5% in 2023. All states and territories recorded population growth during last year, although many of them were net losers of population to interstate migration. It was overseas migration and natural increase that allowed the weakest jurisdictions to record increases, despite losing population from people leaving to live elsewhere in Australia. New South Wales, the most populous state, did not record the biggest rise in numbers - Victoria added more to its population (186,491) than NSW did (185,459) both in raw numbers and in percentage terms. Queensland also had a big rise, adding 141,378 people - because it had by far the largest net gain from interstate migration. Notably, every state and territory was a net loser through interstate migration EXCEPT Queensland and Western Australia - which means lots of people are relocating and most of them are moving to Queensland or to WA. WA in fact recorded the biggest population increase in percentage terms last year, rising 3.31%, followed by Victoria (up 2.78%) and Queensland (2.62%) The places with the weakest growth were Tasmania and the Northern Territory, which both were net losers to internal migration but gained a little from overseas migration. NSW made the biggest gains from overseas migrations but was the biggest net loser from internal migration. So, what does all that mean for real estate? Based on the population trends, where would you be buying real estate? Based on these numbers, you would be focusing on Queensland and Victoria, as well as WA - although we continue to urge caution on the frenzied Perth market. And where would you be avoiding? Tasmania and the Northern Territory, which both have weak economies and negative population figures. But it pays to keep in mind that there is data to consider OTHER THAN population trends. /episode/index/show/hotspotting/id/31972327

Government Makes Key Issues Worse 07/01/2024

Government Makes Key Issues Worse The most concerning thing about the unprecedented shortages which afflict Australian real estate markets is not that they are driving up rents and prices across the nation. Alarming though that is for tenants and for first-home-buyers, the truly concerning thing is the myriad ways in which our elected representatives keep making those problems much, much worse. Every time a state or territory government passes legislation or announces a policy move or hands down a budget which impacts on the rental shortage and housing affordability issue, they make it worse – not better. This is the unsung scandal of Australian politics – that, at a time when the cost of living is such a big issue for so many people, the biggest single cost in the budget of most households (the cost of accommodation) keeps getting worse because our politicians keep making decisions that make it more and more costly. In recent weeks we’ve witnessed the delivery of the Federal Budget and state and territory Budgets– and there’s not a single measure in any of those budgets which deals with the high cost of building and buying houses, or with the chronic shortage of rental properties which is causing residential rents to rise and rise. But there are numerous measures in those state and federal budgets which, directly and indirectly, make those core housing issues worse. And the big-spending pre-election vote-buying handouts in some of those budgets have added fuel to inflation which is likely to keep interest rates higher for longer. If Australia had a news media worthy of its place in society, there would be headlines screaming about this every day. What we do have, every day, is articles and commentary reminding us that there’s a shortage, items on the plight of tenants and on the lack of affordability in real estate – but there is little or no coverage of the steady flow of measures from politicians which continue to make all the problems worse. And there has been little or no commentary on the reality that none of the budgets handed down in recent weeks contain any measures to directly address the shortage of homes available for rental. Some state budgets have policies to build more social housing over the next 4-5 years, but nothing to address the immediate shortage of tenancies. There has not been a single measure to provide encouragement or incentives to the people who provide over 90% of the homes people rent – private mum-and-dad investors. What there has been, notably in the state budgets from the governments of New South Wales and Victoria, and in other policies they have announced, is a series of measures which increase the costs on the people who provide the product that’s in short supply, particularly with new or increased taxes. The industry has sought to warn governments that measures like these will likely worsen the dire shortage situation by forcing investor owners to sell up – or further worsen the plight of tenants by forcing landlords to increase rents. Investors owners have experienced massive increases in their costs recently, with higher interest rates, higher council rates, higher insurance premiums, higher maintenance costs – and, in the case of Victoria and NSW, major hikes in land tax and other taxes. This has meant that rental properties that previously paid their own way are now in a serious loss situation. This forces owners to either sell or increase the price of the product they provide, which is a home for rent. Victoria has exacerbated the problems in that state by introducing new requirements on the standard on the dwellings which will force owners to spend between $5,000 and $10,000 on upgrades. This will tip many owners over the edge and force them the sell – and their tenants will lose their homes. This is already happening. A new report has found that over 3,000 investors sold their Melbourne properties in May alone – and, across Victoria, almost 4,000 rental properties are listed for sale, according to Suburbtrends. Given the strong anti-investor stance of the Victoria state government, the properties being sold are unlikely to be bought by investors, so they will be lost from the pool of rental properties – and vacancy rates will continue to fall, which puts further upward pressure on rents. One of Australia’s most respected property analysts, Simon Pressley of Propertyology, has said his business will not recommend Victoria to investors until there was a change in attitude from the state government. The firm is instead steering would-be investors to specific locations in other states. He has warned that the lack of new investment in Victoria had made the situation for tenants “ugly”. But it’s not only Victoria. It’s also happening in New South Wales, with thousands of investor-owned properties currently listed for sale. The state budget in NSW includes significant increases in land tax – and, according to multi-award-winning buyers ‘agent Rich Harvey of propertybuyer, the changes will cause more investors to sell in NSW and will also prompt intending buyers to avoid NSW. The NSW state budget also imposes a major Emergency Services Levy burden on property owners - and increases taxes on foreign investors, which will also have the impact of reducing rental supply. The Property Council said the NSW budget bombshell “beggars belief”. The Council’s NSW executive director Katie Stevenson says: “It’s a massive cost for property owners facing a once-in-a-generation housing supply and affordability crisis.” The Australian’s wealth editor James Kirby commented that Sydney’s “prime position as the nation’s hottest property investment market is now in jeopardy”, with investors likely to be driven away from the city. The national president of PIPA, Nicola McDougall, said about NSW: “This has come out of nowhere. It’s going to drive rents higher and it’s going to force investors to sell up, just like it has in Melbourne – I really wonder: does the NSW Government understand this?” And my answer would be: No, they really haven’t got a clue. Or, if they do understand, they don’t care about the plight of the one-third of households in NSW who rent their accommodation. In Queensland, where the State Government faces an upcoming election, the State Budget has thrown lots of electioneering cash at Queensland families to help them pay increasingly high electricity bills and for car registration fees, and there was a renters relief package – but there was nothing to increase the supply of rental properties and reduce the cost of building new homes. The Queensland Budget stated the ridiculous objective of building a million new homes by the year 2046 – ridiculous because it’s based on the current government remaining in power for the next 22 years, when the polls suggest they won’t survive in government beyond the state election in October this year. And, like other states, Queensland has slugged foreign investors with higher taxes – which will have the impact of further reducing rental supply and preventing the construction of major apartment buildings. And so the process continues. The rental shortage has been created from years of politicians discouraging, demonising and disincentivising investors – and they continue to make the situation worse for tenants with ongoing measures which punish investors and exacerbate the shortage. The high cost of building new homes, whether they be houses or townhouses or apartments, has been largely, though not entirely, caused by imposts from various levels of government, including local councils, but in particular by state governments. They keep changing the guidelines in ways that add to those costs and they keep slugging builders and developers with taxes, fees and charges – as well as mind-numbing bureaucratic delays which also add to the costs in times of high interest rates. The result is that the standard house-and-land package is so costly as to be increasingly unaffordable for young buyers – and they keep adding more and more layers of cost, including the new construction code which adds up to $40,000 to the cost of building your standard brick and tile house. As a society, we should be outraged by this. Our elected representatives have made housing increasingly unaffordable, both for purchase and for rental, and each passing month they make it worse, while blaming others for the problems. /episode/index/show/hotspotting/id/31957607

Rising Prices Not "Weird" 06/25/2024

Rising Prices Not "Weird" According to our national newspaper, The Australian, the fact that property prices have continued to rise in spite of higher interest rates is, and I quote, “weird” – and apparently the people described by the newspaper as “experts” are scratching their heads about it. The article that contained this nonsense was just another plank in the ever-growing pile of misinformation about real estate issues perpetrated by economists and journalists who don’t allow their ignorance of property issues to prevent them from commenting about them. Journalist Anthony Keane is the personal finance editor at The Australian. And given that he has a fancy title and he works for this major standard-bearer Newscorp publication, the national newspaper, we the readers are entitled to expect him to know something about the subjects on which he pontificates. Sadly, he does not. In claiming that it’s unusual, indeed “weird”, for prices to rise when interest rates have increased, he is demonstrating that he’s not a student of history and he doesn’t waste any time on research before banging away on his computer keyboard. He simply regurgitates the outpourings of economists who subscribe to the kindergarten analysis view that falling interest rates mean property prices rise and rising interest rates mean property prices fall. That pretty much sums up the views of senior economists working for the big four banks and others like them. They continue to believe that interest rate trends dictate everything in real estate, although there is a mountain of evidence that confirms this is not the case – notably in the past 18 months. Many of Australia’s most spectacular property booms have occurred during times of high and and rising interest rates, including in the late 1980s and the early years of this century, when mortgage rates were higher than now and rising, but market activity and prices kept on increasing. Last year, we had the RBA continuing to lift the official interest rate – we saw a total of 13 monthly rises by the time they paused – and yet we had substantial price growth nationally, including boom-level price increases in several of our capital cities and also in several regional markets. According to Anthony Keane, this represents what he calls “a new world of weirdness”. The reality is that it’s not weird, it’s quite normal. And the people who are apparently “scratching their heads” about it are not experts. If they had expertise, they would understand the dynamics in real estate markets and be unsurprised at the price outcomes. People who are really bad at predicting housing markets and price outcomes, like the big bank economists, would rather claim the market is wrong than admit that they are. The past 18 months in real estate has not been an aberration or a unprecedented maverick event – it’s simply another demonstration of the reality that interest rate events are NOT the prime influence on trends in real estate. Right now there are far more powerful forces in play, including the imbalance between supply and demand. So, is this (as suggested by The Australian) a new world of weirdness? No, it’s not, it’s simply business as usual in property markets across Australia, in which interest rates are a factor but not a particularly powerful force – in times when the biggest influence is the shortage of everything important in real estate at times of high demand, causing prices, rents and yields to rise in good locations. Far from this being a case of “weird is the new normal”, normal continues to be normal. /episode/index/show/hotspotting/id/31877282

EOFY Special: Save Big on Real Estate Insights & Memberships 06/25/2024

Research Beats Hype 06/25/2024

Research Beats Hype The most successful property investors have some features in common - and making decisions based on genuine research is one of the key ones. But those people are relatively rare. My observation of the behaviour of investors over four decades shows that more people make investment decisions based on media soundbites than on real research. And, as we embark on a new financial year with all kinds of competing forces in play in real estate, it’s more important than ever that real estate consumers base their decisions on research, rather than media frenzy and herd mentality. Far too many people are leaping recklessly into the Perth property market because mainstream media keeps telling them that prices are booming and will keep on doing so, backed by commentary from real estate people who have a vested interest in prolonging the boom. At Hotspotting, we think this media soundbite approach is fraught with peril and that many of the people diving into the Perth market - grabbing anything that’s for sale and paying more than the asking price, without regard for the quality or location of the property - will regret their decisions made in haste without proper due diligence. It’s a reflection of those views that our new edition of the National Top 10 Best Buys report does not include any locations in Perth. Based on detailed research, we think this market has peaked (after three years of major price growth) and will not be the national leader on capital growth in FY2025, as some are predicting – or hoping. We think there are other, better places for people to be putting their money – safer, less volatile, less heated markets with good potential for capital growth. Well-researched investors buy in areas with growth credentials BEFORE prices escalate. Our choices for good locations to buy in FY2025 are based on research-based knowledge of the key trends driving demand in the best locations across Australia. We’re not focused on short-term sugar-hit gains; we’re focused on places we think will do well in the medium to long term. We base our choices on economic factors, demographic trends and on the locations of influence from big infrastructure developments. At Hotspotting, we are constantly on the look-out for evidence of change in property market trends and individual locations. Places that have been weak performers on capital growth in the past can become the leaders of the future because something major has changed in that market – often caused by the development of major new infrastructure. Sometimes it’s a significant demographic shift – such as the trend that has seen large numbers of people leaving the biggest cities and moving to smaller cities or to regional areas, in search of a different and more affordable lifestyle, enabled by technology. In the past 12 months we have observed a surge in demand for units and townhouses by a range of buyer cohorts, for a host of different reasons – and this is changing one of the dominant paradigms of real estate: that houses outperform units on capital growth. We have also seen he re-emergence of markets that had exceptional price growth from 2020 to 2022, have had 18 months of correction or flatlining and now are starting to grow again. We call them “the second wind markets”. Real estate is dynamic, with change as a constant: if you read the new edition of our National Top 10 Best Buys report, you will know about all the key trends that matter in the new 2024-25 financial year. /episode/index/show/hotspotting/id/31876772

Depreciation Impact 06/20/2024

Depreciation Impact The report we call The Pulse provides critical intelligence for property investors because it shows how you can get both a high rental yield and excellent capital growth if you choose your location well. Recent editions of The Pulse have featured locations where rents have grown 10-15-20% in a year, but so have property values – providing the ultimate win-win-win situation for property investors. Hotspotting produces this report in association with leading national experts on property depreciation, Washington Brown – who provide additional key elements to the data in this report. The figures from Washington Brown show that intelligent application of depreciation tax benefits can create a significant increase in the rental yield of your property. It depends on a number of factors, including the tax bracket you are in, but typical depreciation benefits for an investment property can lift a 6.3% gross rental yield to 6.75%. A 6.4% yield can improve to 6.8% or 6.9%. Tyron Hyde, the CEO of Washington Brown says that “Depreciation is the secret sauce when it comes to property investing - and can turn a good, positively geared property into an even greater property! “Better yet, depreciation can turn a negatively geared property into a positively geared scenario.” Tyron Hyde reminds us that property investors are able to claim the wear and tear of a property against their taxable income, which should be factored into the yield of a property. Depreciation is a non-cash deduction, which means, unlike all other expenses on your property, you don’t have to pay for it. The depreciation amount you can claim is built into your property when you buy it; you just need a Quantity Surveyor like Washington Brown to calculate the number. So, if you get a copy of The Pulse, you can learn a number of key things for property investors: 50 locations which are affordable, where you get above average rental yields, and which have good potential for capital growth – and the important data from Washington Brown which shows how depreciation benefits can turn a good rental yield into a great rental yield. /episode/index/show/hotspotting/id/31831272

Victoria Gets Worse 06/20/2024

Victoria Gets Worse Victoria has become the state that property investors don’t want to know about, because its politicians at both state and local level appear to have declared open season on investors. The State Government in Victoria has a budget deficit problem and has made the decision that many politicians in Australia make, which is to resort to the housing market as their favourite cash cow. They can’t slug home-owners or first-home buyers with new or higher taxes because that’s politically unpalatable – but investor owners are relatively few in number so they can attack them with less damage politically. It will result in fewer investors, therefore fewer rental properties, and therefore higher rents for tenants, but hopefully (in the minds of the state politicians) tenants will blame their landlords rather than the government. So the State Government in Victoria has smashed owners of investment properties in the state with big increases in existing taxes – notably land tax – and with the introduction of new taxes. It’s almost as if they see investors as a criminal class and they all need to be punished. If that isn’t enough, now the State Government has announced it will mandate the upgrade of a range of components inside rental homes This would force landlords to install insulation, draught-proofing, cooling and heating systems and new shower heads – and the estimates for the cost impact of that range from $5,000 to $10,000. Consumers Affairs Minister Gabrielle Williams, displaying the out-of-touch divorced-from-reality quality so common among politicians, says this is a relatively small cost for property owners to wear and won’t be a problem for anyone. But for typical owners, an additional cost of $5,000 or $10,000 on top of huge increases in interest rates, insurance, maintenance costs and government taxes including land tax and council rates, this is a killer blow. There is already an exodus of investors from Victoria because of the recent tax increases and this new imposition of enforced upgrades will compel many more to sell up and leave the state. Veteran property commentator Jonathan Chancellor has described the Victorian State Government measures as “a lesson in what not to do” in the face of a rental shortage crisis. He said that the state bureaucracy had admitted that Melbourne’s rental supply may contract as a result – keeping in mind that it’s already alarmingly low. But it doesn’t end with this appalling state government. Local councils have already joined the increasingly popular political sport of demonising and punishing investors. The Merri-bek Council, or elements of it, want to take the assault on property investors to a new level. The plan is to double council rates on investment properties and reduce rates for everyone else. They say that, if it forces investors to sell and their properties are bought by owner-occupiers, that’s a great thing. In fact, according to the policy stated by the proponent, Cr James Conlan, that’s the main objective. The logic, if you can call it that, is that it will make homes available for purchase by first-home buyers. But most suburbs in this LGA have median house prices well above $1 million. The three Brunswick suburbs are all around $1.3 million. How many first-home buyers in Melbourne can pay over $1 million as their first foray into the property market. It’s simply not going to happen. But, beyond that, where will the tenants of these properties go? Who will provide the rental properties if the local council forces all investor owners to sell, which appears to be the ultimate objective of this appalling proposal. Vacancy rates in the postcodes of Merri-bek LGA are well below the already-low Melbourne average – many of them have vacancy rates around 0.5%, which is at crisis levels. Looking more broadly across the state, the number of homes occupied by renters in Victoria has fallen by 10,400 in just three months and 15,600 in a year. Government agency Homes Victoria’s most recent rental report, from the March quarter, reveals that the number of new lettings has dropped 12% in a year. The rental supply fall has coincided with a shortage of new homes being built, because of labour and supply constraints. It also coincides with an and follows 13 interest rate rises since 2022. figures released earlier this month revealed that housing loans taken out by investors in Victoria were well below the national average amid an exodus of investors from the property market. Ultimately, in the end, who are the biggest losers? Well, it’s the people who rent their homes. There is going to be considerably fewer of them in Melbourne and other parts of Victoria and there will continue to be upward pressure on rents. Unless, of course, someone is silly enough to implement a rental cap, which will cause even more investors to sell and create an even bigger rental shortage. A rental cap is no use to you if you can’t find a place to rent at any price, because nothing is available. /episode/index/show/hotspotting/id/31820342

Affordability Deception 06/20/2024

Affordability Deception There are many so-called research reports in Australia which do a very poor job of providing useful, accurate, credible information to consumers – but the worst of the worst is a report called Demographia which pops up once every year to misinform Australians about affordability. This report, which is a shameless propaganda exercise by a developer lobby group, sets out to portray Australia as a place where no one – and I do mean no one – can afford to buy real estate. The lobby group is apparently trying to convince governments across Australia that the development industry is over-regulated and that this over-regulation is causing unaffordable housing everywhere – and I do mean everywhere – in Australia. This ridiculous report has been claiming for 20 years that the whole nation of Australian is unaffordable. And the latest edition of the report claims that significant chunks of Australia are and I quote, “impossibly unaffordable”. Now, think about it for a moment. If this was true, no one could afford to buy homes in Australia at all. Because, essentially, that’s what they’re claiming - that no one can afford to buy real estate. Clearly, that’s a ridiculous and preposterous claim because all over Australia there is a high level of sales activity and prices continue to rise in most locations. The latest official lending figures show that loans to owner-occupiers, to first-home buyers and to investors have all risen substantially in the past 12 months. There is high demand for homes and for investment properties and the high level of sales is causing prices to rise in most locations. Now, none of that would be possible if the Demographia report was credible and accurate – because it says the whole country is unaffordable. Indeed, it says our major cities are the most unaffordable in the world. But here’s the thing – the report doesn’t cover the world. It only compares Australia will a tiny proportion of the nations on the planet. There are over 200 countries in the world – and how many are included in this report? Just seven. Australia and six others. And yet it maintains that it can justify the claim that Australian cities are the most unaffordable in the world. Now, if common sense prevailed, you and I wouldn’t even be aware that this report exists because it’s so implausible and lacking in any merit whatsoever. But we DO know about it because news media in Australia doesn’t care about ethics or accuracy or fairness or credibility. Journalists, sadly, care only about the headline and don’t care that the information on which the headline is based is patently, blatantly and obviously false. Michael Bleby, who apparently is the Deputy Property Editor for the Australian Financial Review, was happy to report that Sydney, Melbourne and Adelaide are all “impossibly unaffordable” and ran the headline “Impossibly unaffordable housing a social risk”. Bleby stated that Sydney is the world’s second-least affordable city for housing, based on the content of the Demographia report. Now, I’m assuming that Bleby has seen the report, because it would unprofessional and unethical in the extreme to make such claims without looking at the evidence. So I can only conclude that he doesn’t care too much about the substance of what he is writing, so long as it generates clickbait. News Corp journalist Aidan Devine put his name to an article that stated that three of our capital cities were ranked in the top 10 most unaffordable housing markets in the world – and then claimed that Australia was the least affordable housing market in the English-speaking world. So these journalists and others were happy to make these outrageous claims despite what the facts show us. I’ve read half a dozen different articles on this and only one of them mentioned, briefly, the small number of countries in the report. In Sydney, claimed by the report to be “impossibly unaffordable”, there were 73,290 homes sold to buyers in the past year. And the median house price rose 8.2% in the past 12 months, according to CoreLogic. In Melbourne, also claimed to “impossibly unaffordable”, 86,200 homes changed hands in 12 months, with house prices rising 2%. And in Adelaide, which is actually one of our most affordable capital cities - but also dubbed “impossibly unaffordable” by this shameless document - over 20,000 houses and apartments were purchased by buyers who were apparently unaware that the homes they were buying were utterly unattainable. And Adelaide house prices rose 14.3% in the past year, according to CoreLogic. So, if they were impossibly unaffordable before, they must be catastrophically unreachable now, after a further 14% increase in prices overall. Clearly the report on which all that media hot air is based is laughably and demonstrably rubbish. But you can sure that this time next year it will pop up again and come up with new sensationalist claims that aren’t supported by any scientific evidence – and our hopelessly shabby news media will be happy to publish it, because they don’t give a toss about providing you with real information and useful data. /episode/index/show/hotspotting/id/31820207

No Money Down Investing with Lucky Velasquez 06/14/2024

Interviews with the 1% - Melinda Jennison 06/11/2024

Interviews with the 1% - Melinda Jennison 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 pre-recorded interviews bring you valuable knowledge and advice from Australian property experts who walk the walk and practice what they preach. Learn from their mistakes, successes, and unique perspectives on property investment. These interviews are a must-watch for anyone looking to build a successful investment portfolio and achieve financial freedom. With over 71% of investors owning only one investment property, we understand the challenges and uncertainties that come with growing your portfolio. That's why we have curated a series of interviews that exclusively feature investors with multiple properties. They represent the top 1% of Australian investors and have achieved remarkable success in their investment journey. Our pre-recorded interviews are available for you to watch at your convenience, so you can take in all the knowledge and insights at your own pace. Hear firsthand how they navigate the ever-changing property market and make profitable investment decisions. You'll be able to walk away with practical tips and strategies that you can implement in your own investment journey. About Melinda Jennison From a very young age Melinda developed an interest in real estate because her parents were property investors, so she learnt a lot from the conversations that they often had growing up. Melinda says she has been fortunate to have never rented, but instead bought her first home in Brisbane at the age of 18. This was the beginning of her own property journey. Melinda came from a research background, having completed a PhD in 2001. Instead of staying in academia she moved into real estate, with involvement in the building and construction industry and property development. Now as a buyers advocate and QPIA®, Melinda uses the skills she has acquired over the years to make evidence based property decisions, to accurately interpret data and translate that in an easy way for clients to understand, and analyse all sorts of property deals for herself and others. In September 2023, Melinda’s outstanding expertise in the property sector was recognised when she was elected President of the Real Estate Buyers Agents’ Association (REBAA). You can find out more about Melinda and Streamline Property Buyers by visiting https://streamlineproperty.com.au/ /episode/index/show/hotspotting/id/31692057

NSW Investor Boom 06/10/2024

NSW Investor Boom The latest lending data from the Australian Bureau of Statistics finds that loans to investors in New South Wales in April represented a 44% increase on the same time last year. That’s a major jump in buyer demand, but it does not surprise the team at Hotspotting, particularly after the analysis we have done on market trends for the Winter edition of The Price Predictor. Our research shows there is heightened buyer activity in selected locations, both in Sydney and in Regional NSW. The Price Predictor Index finds that some of the nation’s regional areas are the leading markets in the nation, including the Wollongong/Shoalhaven region in NSW. In the Winter edition of the PPI, we have nominated the Shoalhaven LGA as the strongest market among the nation’s municipalities, while the City of Wollongong also makes our National Top 10. The Price Predictor Index for several years has charted the trend we call The Exodus to Affordable Lifestyle and our latest analysis suggests the demographic drift from the biggest capital cities is still pumping strongly. In some cases, the NSW regional markets of note are what we call “second-wind markets” -locations across Australia which were at the peak of their up-cycles in 2021 and then subsided in 2022 and 2023 – but are now showing signs of embarking on the next up-cycle, with improved activity late in 2023 and early in 2024. A prime example is Byron Bay which previously had a boom which, in reality, overshot true value – with property values doubling in two years. The median house price peaked at $3.5 million in mid-2022, but dropped markedly since to as low as $2.4 million. Now we see evidence in the sales data of a pickup in activity and also the first signs of prices recovering. The strong Albury-Wodonga regional city at the NSW-Victoria border was a boom market until mid-2022 – and now, after a flat period, is showing early signs of revival. The suburb of Albury is one of our National Top 50 Supercharged Suburbs in the Winter edition of The Price Predictor Index. Other standout locations include Newcastle and nearby areas such as Lake Macquarie and Port Stephens. Mid-coast centres like Forster and Taree are also travelling well. In Sydney, the top end is undoubtedly leading the Sydney market while the cheaper areas are struggling to maintain their previously high sales levels. Locations where houses sell for multiple millions of dollars are the strongest clusters for buyer activity, in a Greater Sydney market where sales levels have moderated a little but continue to be solid. Our analysis reveals three stand-out clusters of suburbs where sales activity is most vibrant, all of them at the upper end of the market – the municipalities of Woollahra, Waverley and Bayside. Within these LGAs, suburbs classified as rising markets include Bondi, Darling Point and Paddington. Inner-city areas which have been boosted by strong demand for apartments in the past year or so – Sydney City and the Inner West LGA - continue to generate good buyer demand. Rising suburbs in the City of Sydney include Surry Hills and Woolloomooloo, while Chippendale stands out for its consistency of performance. At the opposite end of the market spectrum, outer ring areas including the municipalities of Blacktown, Hills Shire and Penrith have lost momentum and have significant numbers of suburbs classified as declining markets. This is part of a notable trend nationwide which finds that new development areas are among the struggling markets with sales activity falling. The problems within the housing construction sector are well-documented, with building companies going broke amid rapidly rising costs and shortages of tradespeople and materials. We note that sales levels in the City of Blacktown, which has been a star performer in Sydney in recent years, have faded notably. It’s noteworthy that many of the declining suburbs have median house prices well above $1 million and no longer provide relative affordability, including Rouse Hill, The Ponds and Schofields. In The Hills Shire, an even more expensive market in the far north-west, sales activity generally has dropped notably and half its suburbs are now rated as declining markets. They include a number of suburbs which all have median house prices above $1.7 million and in some cases above $2 million. Listings of homes for sale have been trending upwards in the Hills District recently, so low sales volumes cannot be attributed to a shortage of properties. But beyond that hiccup in the outer Sydney market, New South Wales broadly presents as a place that is attracting strong buyer demand, both in Sydney and in regional markets, with an uplift in investor activity a key factor. /episode/index/show/hotspotting/id/31676947

Why Builders Aren't Building 06/10/2024

Why Builders Aren't Building Home builders and property developers make their money creating new dwellings for Australian households. If they get it right, they can make lots of money doing what they do. When they decide NOT to do what they do, you have to ask why. Why are the builders of major projects of housing or apartments walking away from their plans? Why are big companies who have spent years and millions of dollars planning a major project making the decision not to build it? We’ve seen many instances recently. An example is the decision by AVJennings to abandon a major housing development near Caboolture in the outer northern suburbs of Greater Brisbane. This project would have added 3,500 new homes to a market where there is a desperate shortage. Brisbane is a market with high demand and a serious shortage of homes. Why would a big developer with a proven track record and the capacity to deliver these kinds of projects make the very big decision to walk away from the project? All that time and money wasted. The answer is: it’s simply not viable. AVJennings said massive cost escalations – including the infrastructure charges and delays in getting approvals imposed by local councils – meant the project was no longer viable. I have had discussions recently with developers who say that the cost of creating big residential projects is so high, it’s not economically and financially feasible. They would have to place such a high price on the end product that few households would be able to afford to buy the homes. A number of developers have spoken out about the impact that the cost impositions of local councils have on making projects difficult or unviable. Orchard Property Group managing director Brent Hailey says the major infrastructure costs imposed on them make it too expensive for them to build homes. Hailey said that, for example, developers in that Caboolture West precinct that AV Jennings has rejected had to pay for council infrastructure charges and also state government charges because it’s in a Priority Development Area. Hailey says: “We’re at this point now in SEQ where unless the solutions are put in place quickly, there’s going to be a rapid decline in affordability, forced by supply not meeting demand.” He says: “The problem facing developers is the cost of delivering the infrastructure and the balance between fully servicing those costs and trying to get an affordable home. There’s the normal council charges and the Priority Development Area (PDA) charges. During Covid-19 costs went through the roof, so now infrastructure is costing a lot more.” Here’s another issue which is preventing the creation of affordable homes in Australia. Prime Minister Anthony Albanese’s pledge to build through the Government’s $10bn housing fund will struggle to deliver any houses at all in Labor’s first term of office because only a handful of builders in Australia are eligible to participate in the program. Rules written into the legislation require builders contracted to work on under the scheme to be accredited for working on government-funded projects. However, of the more than 400,000 construction companies registered in Australia, only around 500 are accredited by the under the Work Health and Safety Scheme for eligibility to bid for head contracts funded directly or indirectly by the government. There are few if any residential builders accredited under the scheme in Tasmania and only a limited number in regional Australia. The industry claims the limitation threatens to severely hamper or stall Housing Australia’s ability to deliver its target of 40,000 social and affordable homes. This comes at a time when the new construction code being imposed by governments is adding $30,000 to $40,000 to the already-high cost of building new homes in Australia. These are just the latest events adding to a substantial list of situations which create the inevitable conclusion that we have a serious housing shortage in Australia, and very expensive new homes in this country, because of the short-sighted policies of politicians at all levels of government. /episode/index/show/hotspotting/id/31676892

Investor Lending 06/10/2024

Investor Lending Home loans to property investors jumped for a third-straight month in April, rising at a faster pace than loans to owner-occupiers. The value of new loans to investors rose 5.6% to $10.9 billion in April, to be up 36% compared with a year ago, according to the Australian Bureau of Statistics. Part of that increase, according to the ABS, is an increase in the size of the average loan. The average size of an investor loan for the purchase of an existing home grew almost 10% since April 2023, from $592,000 to $648,000. The strongest markets were New South Wales (where investor lending increased 44%) and Queensland (where investor lending climbed about 46%). The higher rate of investor activity comes at a time when rents continue to rise, underpinned by very low vacancy rates, to compensate (partly, at least) for higher interest rates, as well as higher council rates, higher insurance costs and higher maintenance costs. Figures from property consultancy CoreLogic earlier this month showed rents recorded an annual rise of 9% in Sydney and 10% in Melbourne – which means rents in the two big cities are rising faster than prices at the moment. The rate of price growth is higher in smaller capital cities like Brisbane, Adelaide and Perth, but rental increases are as high, or close to being as high, as the rise in sales prices in those cities. CoreLogic research director Tim Lawless says: “For most investors, higher yields will be welcome considering variable interest rates for investor loans are averaging 6.7%. “Given the high cost of debt, a large portion of leveraged investors are probably recording a cash flow loss despite the substantial rise in rental income.” The increased activity from investors is welcome, after a period of being well below historical averages – which, in simple terms, is why we have a rental shortage, given that investors provide over 90% of the homes rented by tenants in this country. The rise in buying activity by investors confirms the anecdotal evidence we have seen at Hotspotting. Right from the start of 2024, we have observed that many investors started this year with intent – and are taking action. This is desperately needed across Australia, as it’s the only way that the chronic shortage of rental homes will be improved. /episode/index/show/hotspotting/id/31676852

Australia's Top Growth Suburbs Revealed! 06/05/2024

Price Predictor Index Winter Edition is Out Now! 06/05/2024

Price Predictor Index Winter Edition is Out Now! I’m about to tell you what’s going to happen with property prices this year and I’m going to tell you why. The information real estate buyers MOST want to know is where to buy for superior capital growth, both in the short term and the long term. The problem for investors is that the research companies and the media don’t tell us that. They tell us what’s recently happened with property prices. They inform us about the past. And while that may be interesting, it doesn’t provide us with the really key information: what will happen with prices in the future. That’s where Hotspotting comes in. Our proven methodology has a track record of predicting the future successfully and often. And one of our core techniques is used to create the best of our stable of reports: The Price Predictor Index. The underlying principle is really simple but wonderfully effective. We don’t spend our time charting price movements - we devote our resources to following what’s happening with sales volumes - the number of sales in each location and whether they’re rising, flatlining or falling. History tells us that sales activity is a forward indicator of what will happen with prices. And the new Winter edition of the report provides important clues about which markets are rising and which ones are falling. Here are some of the key pieces of market intelligence that our new analysis provides:- The Perth boom has likely peaked and we urge caution for the many investors diving into this market after three years of big price growth. Melbourne prices will perform a lot better in 2024 than they did in the past two years. Some of the regional markets have stepped up as likely national leaders on price growth in the next 12 months. They include places like the Wollongong region, including in particular the Shoalhaven LGA; Gladstone in Central Queensland; and Albury-Wodonga at the Victoria-NSW border. Smaller capital cities which have been weak lately are showing solid signs of recovery and will do better in the next year, including Canberra and Darwin. Some of the iconic markets which had spectacular booms up to 2022 and have been in a correction phase since then, are now showing signs of moving into their next up-cycle. They include Byron Bay, the Sunshine Coast and the Mornington Peninsula. Other former boom markets that look to be heading into another period of growth include Albury-Wodonga, Ballarat and Bendigo in Victoria, Hervey Bay in Queensland and Launceston in Tasmania. Apartment markets in good locations in our biggest cities continue to attract buyers in large numbers with improved capital growth performance - Sydney City and the Inner West nearby are among the stand-outs. The Winter edition of The Price Predictor Index has other priceless intel - including the National Top 50 Supercharged Suburbs list, the 50 most consistent growth markets in the nation, the 10 leading local government areas in Australia and the 50 worst declining markets, the ones to avoid. From these lists, we nominate the No.1 best supercharged suburb, the nation’s most consistent location which is delivering big price growth - and the worst place to buy right now. And, if you want to know what they are, you’ll need to get a copy of the report. /episode/index/show/hotspotting/id/31610517

From Beginner to Pro: Mastering the Art of Commercial Property Investment 06/05/2024

Population Hotspots 06/05/2024

Population Hotspots It’s important for property investors to understand the difference between a population and home building hotspot – and what we at Hotspotting would define as a property growth hotspot. There are those who believe that the best philosophy in selecting good places to buy real estate is to follow the population growth – and buy in the locations where population is growing the most or the fastest. This, we believe, is a very poor strategy. Very often, the locations that have the highest population growth rates do so simply because they’re locations on the fringe of a major city where there’s land available for building new housing estates – and naturally the population will grow there, often from a very low base. And sometimes the growth in prices in these kinds of locations is subdued because there are large quantities of new housing supply being created – i.e. there’s an absence of shortage. By contrast, some of the best capital growth is often achieved in locations where there is little or no population growth – because they’re established suburbs with no large vacant areas for new homes to be built. The only way the population can grow in such places is by increased density – for example, houses are knocked down and replaced by apartment buildings. Recently the Housing Industry Association published its latest hotspots report – and their definition of a hotspot is very different to ours. The HIA report seeks to identify the areas where the greatest amount of new population and new home construction is occurring. Media reported on this with headlines such as: “Population Boom Creates Hotspots”. A typical article said: “Surging population growth is creating housing hotspots in the suburban outskirts of Australia’s major capital cities. “The annual Housing Industry Association Population and Residential Building Hotspots Report says the northwest Sydney suburbs of Box Hill and Nelson are Australia’s biggest hotspots for construction, followed by Fraser Rise and Plumpton in Melbourne’s west.” Now, this is a perfectly valid report for the HIA to produce, because it speaks to the primary activity of its members, the important business of creating new dwellings – something the nation needs, because there’s a serious shortage. The HIA definition of a hotspot is “areas where population growth eclipses the national rate of 2.4% and building work is worth more than $200 million”. But it’s important to understand that such places are not necessarily good places to invest. The Hotspotting definition of a hotspot is a place where there are underlying economic factors likely to create superior capital growth in the medium to long term. Our EMPERICAL formula for selecting the locations likely to become capital growth hotspots includes the strength and depth of the economy, the size of the population (but not how much it is growing), the existing infrastructure and amenities, investment in new infrastructure and a number of other features. Locations that satisfy the various criteria in our EMPERICAL formula are far more likely to deliver superior capital growth than city fringe locations where the population is growing fast through new housing estates. /episode/index/show/hotspotting/id/31610287

Relentless Podcast: Season 5, Episode 9 - Feat. Tim Graham 05/29/2024

Learn The EMPIRICAL Formula Webinar Replay 05/28/2024

Hotspotting

TOPICS