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!

Canstar: The Dream Is Alive 09/13/2024

Canstar: The Dream Is Alive 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 demonstrates that the Dream is very much alive. The Deposit Stars report shows that there are attainable options for young buyers in all our city and regional markets, including the biggest and most expensive cities. And the finance data indicates our property markets remain as active as ever. A report from the Housing Industry Association in August 2024 noted that “various segments of the housing market are increasingly active, with lending to first-home buyers, owner occupiers, and investors increasing in the first half of 2024”, based on the latest ABS lending data. HIA economist Maurice Tapang said: “This increase in lending is partially driven by first home buyers. The number of loans issued to FHBs in the June quarter was 5.8% higher than the March quarter.” This reflects ABS data on the broader market encompassing all types of residential real estate loans up to the end of June 2024. One of the reasons home ownership is often declared beyond the reach of the average consumer is that most reports are based on unrealistic parameters. As I comment in the Deposit Stars report, most analysis on affordability is based on the size of a 20% deposit to buy a house at the median price in our major cities and how long it would take to save such a deposit. These reports preclude the possibility of smaller deposits, particularly with the help of government programs. They overlook the reality that most people entering the market for the first time buy houses in the lower price ranges well below the city’s median price. And they usually ignore the preference of many buyers for attached dwellings – apartments, townhouses and units - and not only because they’re cheaper. Many of the locations featured in the Canstar report reflect a growing phenomenon in Australian real estate: the rise of attached dwellings as the home of choice by more and more buyers. A range of cohorts are opting increasingly for units and townhouses, including downsizers, lifestyle buyers, migrants and first-home buyers. One of the features that draws growing numbers to apartments is location appeal. Not only do attached dwellings allow people to access property in good locations at cheaper prices than houses, but the average unit is better located than the average house. The “Measuring Home Price Differences” report by Infrastructure Victoria found that units consistently trump houses on proximity to desirable features. The report says: “Units are located closer to selected infrastructure types, on average, than houses and townhouses.” This is one of multiple factors driving higher demand for units – challenging the dominant paradigm of real estate (that houses always outperform units and townhouses on capital growth). That is undoubtedly changing. Recently Ubank, which is a division of National Australia Bank, published a survey which found more than half of Gen Z and Millennials who don’t own a home are looking to make a move on the property market within the next five years. 56 per cent of survey respondents – all Australian Gen Z and Millennials between the ages of 18 to 43 – aim to purchase their first property within the next five years. Nine out of 10 respondents agrees that purchasing a home was one of their goals in life – although most acknowledged it won’t be easy. In addition to all that, research from the Commonwealth Bank confirms that ownership remains an ambition and that the number of first-time buyers going it alone is growing. According to data from the big four bank, 40 per cent of first home buyers purchased their property alone in the first six months of 2024 – without going in on the purchase with a partner, friend, or family member. That’s a jump from the 35 per cent of first-time buyers doing the same in 2019. So there is compelling evidence that home ownership not only remains a primary goal for young Australians, but that it is being achieved in growing numbers. /episode/index/show/hotspotting/id/33031172

The Art of Buying Against the Grain with Arjun Paliwal of Investorkit 09/10/2024

Listing Leap 09/09/2024

Airbnb Furphy 09/09/2024

Airbnb Furphy 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 in Victoria. Victoria, which has the highest property taxes in the nation, is by far the worst place in Australia to own an investment property – and the State Government there continues to work hard to confirm that reputation. Its latest move is to blame the rental shortage on property owners who use short-term letting platforms like Airbnb, rather than have permanent tenants. Choosing to use short-term letting is a perfectly reasonable and legal thing to do – and there is considerable public demand for houses and apartments made available for holiday letting, as an alternative to expensive hotel rooms. But the Victoria Government has decided to demonise owners to use Airbnb and other similar platforms so that they can hit them with a major new tax and raise some desperately needed revenue for a government that is strapped for cash. They’re claiming it will fix the rental shortage, but of course it won’t. Airbnb didn’t cause the rental shortage in Victoria or elsewhere in Australia – it’s a very minor part of a much larger problem, and curtailing it won’t create higher vacancies and lower rents for permanent tenants. This has been confirmed by a number of university studies, including one by the University of Queensland which found that banning short-term letting would not make any significant difference to the rental shortage. And RMIT University in Melbourne has come up with a similar finding. An RMIT University expert says the Victorian short stay rental reforms won’t solve the rental housing crisis. Dr Liam Davies, an urban planning expert from RMIT’s Centre for Urban Research, says the new powers granted to Victorian councils and owners corporations to restrict or ban short stay rentals are UNLIKELY to have a significant impact on the state’s housing crisis. Dr Davies said the reforms will likely have minimal effect on overall rental affordability. He says: “This change to short stay accommodation is likely to have positive benefits at a local level but may not significantly impact the state’s rental affordability issues.” Dr Davies cautioned against expecting widespread changes to the rental market as a result of these policies. He said it’s unlikely that all those Airbnb dwellings would be shifted to long-term rentals – so the effect of the reform will probably be minimal. The most likely response of property owners faced with these new restrictions will be to sell – as many investor owners of Victorian properties have already done recently – thereby making the property shortage worse. /episode/index/show/hotspotting/id/32968607

CoreLogic Illogic 09/04/2024

CoreLogic Illogic 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 cities are experiencing a slowdown in value growth because, they say, fewer people are moving from the cities to the regions and because of the elevated interest rate environment. Regional markets saw dwelling values increase by 1.3% over the three months to July. CoreLogic economist, Kaytlin Ezzy, said this means the pace of growth has eased from recent peaks. She noted, however, that growth trends across Australia’s 50 largest regional markets have become increasingly diverse, including 11 regions which saw values rise by more than 3% in the quarter. So here’s what wrong with that analysis, for want of a better word. Firstly, they have made the common error of placing great significance on short-term data. The rate of price growth, overall on average across regional Australia, is less than it was a few months earlier, apparently, therefore they say that the market is declining. But price graphs are seldom smooth and future months may see a return to higher price rises. It’s always unwise to declare a new trend based on one recent set of short-term figures. Secondly, they claim internal migration to the regions is no longer happening as strongly as before. The latest Regional Movers Index, jointly published by the Commonwealth Bank and the Regional Australia Institute, strongly disagrees with that statement. It shows that Australians continue to relocate from Sydney and Melbourne to regional areas in large numbers. Thirdly, the claim that elevated interest rates are causing a decline is farcically stupid. The RBA started lifting the official interest rate in May 2022 and it rose steadily (by a total of four percentage points) until November 2023. So interest rates have been elevated for over two years – and there has been no further rise in the past nine months – but now, according to Core Illogic, elevated interest rates are causing a decline in regional property markets. And how does that theory sit alongside the reality that, according to Core Illogic, 11 regions recorded a rise of more than 3% in the latest quarter? They say that “if you torture statistics enough, they’ll tell you anything you want to hear”. That’s particularly true for economists who subscribe to the theory that everything that happens in residential real estate is caused by interest rate trends, notwithstanding lots of compelling evidence to the contrary. The truth is that we still have a situation where many of Australia’s strongest property markets for price growth are in the regional areas, headed by boom regional centres like Bunbury, Mandurah and Geraldton in Western Australia, and Rockhampton, Toowoomba and Townsville in Queensland. Regional Australia continues to provide the best options for investors seeking affordable prices, higher rental yields and good prospects for capital growth, provided you choose your location with care. /episode/index/show/hotspotting/id/32889472

Perth Property Shift 09/04/2024

Perth Property Shift 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 a couple of years of stellar price growth, that’s no longer the case. Perth is now well above Hobart and Darwin with its median house price and challenging Adelaide. Perth now has a median house price around $800,000, but its median unit price is in the low $500,000s, still well below that of Hobart and Adelaide. The evaporation of affordability in the Perth housing market can be seen is the rise in values in selected suburbs. Armadale, heavily targeted by investors and FHBs, had a median price of $250,000 three years ago and now it’s approaching $500,000. Seaside Rockingham had a median price below $400,000 at the start of 2021 and now its $630,000. Greater Perth has many similar examples. When the bargain suburbs have medians above $500,000, the big attraction that caused the stampede starts to fade. So now buyers in Perth, increasingly, are looking at unit markets. While many house markets have been frenzied, with listings selling within days and prices rising by 20% or more a year, the unit markets are less competitive and prices have not yet taken off. The City of Perth provides a case study. The median unit price for East Perth has risen 6% in the past 12 months while the suburb of Perth has increased 9%. Typical units are priced in the mid-$400,000s. Quarterly sales have been 406 490 599, showing a major lift in buyer demand recently. In the City of South Perth, unit sales in both Como and South Perth are rising strongly, while in Subiaco quarterly unit sales have been trending higher for the past 12 months – the median unit price is heading towards $600,000, but that’s a third of the price of typical Subiaco houses. There’s a similar pattern in Victoria Park, where the median unit price has risen 11% but remains low at $400,000. Upmarket Mosman Park provides a startling contrast between its house and unit markets: there have been identical sales numbers in the past year, but the median prices are $2 million for houses and $380,000 for units. Perhaps not surprisingly, sales volumes for units are rising strongly, but prices haven’t moved much as yet. There are many other examples in the Perth market, which is now following patterns seen in other cities in the trend we call the Rise and Rise of Apartments. /episode/index/show/hotspotting/id/32889457

Adelaide’s Market Surge 09/04/2024

Adelaide’s Market Surge 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 high performance and helps to explain why it has been a challenger to Perth as the market with the highest price growth in the past two years. Adelaide’s median house price rose 15% in the 12 months to August 2024, while the median unit price increased 12%, according to PropTrack data. Only Perth has recorded higher annual price growth. Across the Greater Adelaide market, suburbs with positive trends with sales activity outnumber those with negative ones by a factor of three to one. The Greater Adelaide area has standout markets across all price ranges, including affordable municipalities like Playford and Salisbury, middle market areas including Marion and West Torrens, and more upmarket locations such as the Unley, Holdfast Bay and Charles Sturt LGAs. The Playford LGA, which contains Adelaide’s cheapest suburbs, is the most popular precinct for buyers, with over 800 dwelling sales in the June Quarter. That was 31% higher than the same time last year – and a 53% increase on the March Quarter. Most Playford suburbs have positive sales trends, either rising or consistent, with Blakeview and Davoren Park in particular standing out for their consistent buyer demand. The median house price for Blakeview has risen 16% to $550,000 in the past 12 months, while Davoren Park is up 33% to $440,000. Davoren Park had a median house price of just $175,000 three years ago. The neighbouring Salisbury LGA, another precinct targeted for its affordable homes, is also a strong performer with sales levels considerably higher than the March Quarter and also the same time in 2023. Rising markets in the City of Salisbury are headed by standout suburbs like Ingle Farm and Mawson Lakes. The median house price for Ingle Farm was $380,000 three years ago and is now $655,000, after 19% growth in the past 12 months. Another outer-ring location with outstanding numbers is the Mount Barker LGA, which has recorded the highest quarterly sales numbers in more than three years. The suburbs with strongly rising sales activity include Nairne and Mount Barker. Nairne’s median house price has risen 17% to $750,000 in the past 12 months. Among the middle market areas, the West Torrens LGA is a notable performer with a significant increase in sales activity in the June Quarter – the highest levels since late in 2021. There are no suburbs with negative trends in West Torrens, while rising markets are headed by Underdale, Torrensville, Plympton and Fulham. The Port-Adelaide Enfield LGA has numerous suburbs with positive ratings, with sales activity overall much higher in the June Quarter compared to the March Quarter and the same time last year. Notable rising markets include Lightsview and Blair Athol. The City of Marion has recorded its highest quarterly sales numbers since mid-2022 in a market dominated by suburbs with positive sales trends, including rising suburbs Warradale, Hallett Cove and Edwardstown. The median house price for Hallett Cove has risen from $470,000 to $800,000 in the past four years. Some of Adelaide’s more upmarket precincts are also travelling well. Ten of the suburbs in the Charles Sturt LGA are ranked as rising markets, headed by Flinders Park, Findon and Bowden. Sales activity has been rising steadily in the Holdfast Bay municipality in the past four quarters. A standout feature is that the unit markets in both Glenelg and Glenelg North are classified as rising markets in our latest analysis. The upmarket City of Unley has a particularly strong June Quarter, with sales numbers up almost 50% on the March Quarter. Rising suburbs include Parkside (median house price $1.3 million), Clarence Park ($1.27 million) and Myrtle Bank ($1.6 million). The overall conclusion is that the Adelaide market continues to pump strongly and is likely to be a national market leader on price growth for the foreseeable future. /episode/index/show/hotspotting/id/32889377

Investor Market Share 08/29/2024

Investor Market Share 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 much everything. And, like so much of the debate about housing issues, it’s patently false and nothing more than an expression of the politics of envy. So let’s look at the reality of who has influence in our housing markets and in particular in causing prices to rise over time. My view over time, supported by the research evidence, is that the largest and most powerful cohort in the residential real estate industry comprises home buyers other than first-home buyers – i.e. owner-occupiers buying their next home, whether up-grading or downsizing. They are the largest group of buyers numerically, they have the greatest market share and they have the greatest borrowing capacity and ability to pay higher prices than any other group in the market – they’re older, have higher incomes, have equity in their existing homes, they’re aspirational and they have borrowing capacity, far more so than first-home buyers or the average investor. The latest edition of the NAB Residential Property Survey tends to confirm that view. The report states that buying activity in the established property market is, and I quote, “dominated by owner-occupiers net of FHBs” – which means home buyers other than first-home buyers. The NAB report says they comprise 44% of buyers in the Australian housing market and comments: “These buyers account for the lion’s share of established home sales in all states.” The next biggest buyer cohort is first-home buyers, who comprise 34% of buyers in the market. Australian investors are just 18% of buyers and foreign investors around 4%. So the people constantly blamed for prices rising and causing poor housing affordability, Australian property investors, have a market share of just 18%. More than three-quarters of buyers out there in the market are home-buyers – and they have massive advantages over investor buyers. They have lower interest rates, they have lower levels of stamp duty, they have lower council rates and lower rates of insurance, and they don’t have to pay land tax or capital gains tax. If they’re first-home buyers they also receive government grants and other assistance measures, including stamp duty concessions. The only advantage that property investors can access is negative gearing, which around half of property investors can use to reduce their tax. The research shows that the typical property investor is young, on an income below $100,000 and restricted on what they can pay by their borrowing capacity, which is less than a home buyer on the same income because the investor has to pay higher interest rates and stamp duty. What many politicians and journalists want us to believe is that a cohort which is just 18% of the buyers in the market and restricted in their borrowing capacity by numerous factors somehow overpowers the 78% of buyers who are owner-occupiers - and therefore, apparently single-handedly cause house prices to rise. It simply isn’t so. The myth of the advantaged and privileged property investor is the greatest lie in real estate. /episode/index/show/hotspotting/id/32787417

Exodus Trend 2024 08/29/2024

Exodus Trend 2024 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 pandemic restrictions. But media continues to perpetuate the fiction that this was a Covid thing – and to express surprise that, now that we no longer have lockdowns and border restrictions, people are not all moving back to the big cities. The latest quarterly edition of the Regional Movers Index confirms that this trend is as strong as ever – and it has generated more shock/horror/amazement from journalists who think it was all about the Covid lockdowns. One article in major media expressed surprise that “Australia is not going back to the pre-pandemic way of life”. And there’s a very good reason for that: this trend has very little to do with the pandemic. The Regional Movers Index – which is a collaboration between the Regional Australia Institute (RAI) and the Commonwealth Bank - has once again reported that there are far more people relocating to regional areas than making a move in the opposite direction to major cities, with a 27 per cent difference in the June 2024 Quarter. What the latest figures confirm, according to RAI chief executive Liz Ritchie, is that “the population movement we’re seeing is a sustained trend”. Ritchie says: “Regional Australia has become the nation’s new frontier.” The latest data highlighted a number of specific hotspots that are reaping the benefits of Australia’s romance with the regions. Lake Macquarie, which sits beside Newcastle in NSW, has emerged as one of Australia’s most popular destinations for movers, securing an almost 5 per cent share of net internal migration over the past year. Neighbouring local government areas on the NSW south coast such as the Bega Valley and Eurobodalla both experienced strong annual and quarterly surges in movement, according to the report. Large centres within a few hours’ drive of capitals remain popular with many movers, however the regions that experienced the biggest population changes over the past 12 months were generally further afield, including Townsville (Qld), Mid-West Regional (NSW), Strathbogie (Vic), Murray Bridge (SA), Greater Geraldton (WA) and George Town (Tas). Approximately three-quarters of the city dwellers who made the move to the regions in the past three months found new homes in either regional NSW or Victoria, confirming that Sydney continues to shed the highest number of residents, followed by Melbourne. But that’s not to say that Queensland’s appeal has waned entirely, with regional Queensland’s share of net city outflows sitting at 19 per cent, even though it was as high as 41 per cent this time last year. Indeed, the Sunshine Coast has retained its title as the nation’s most popular destination for relocators, accounting for a 14 per cent share of net internal migration. The Gold Coast has slipped down in the rankings, however, with the city experiencing a net outflow of people to other regional areas. Western Australia also proved attractive for relocators, with Albany, Bunbury, Busselton, Capel and Northam all seeing an inflow of new residents. The overall picture is that the trend of people moving from Sydney and Melbourne to regional areas continues strongly, with large numbers of big city dwellers still seeking a different and more affordable lifestyle. /episode/index/show/hotspotting/id/32787392

Poll Fixing Crisis 08/29/2024

Poll Fixing Crisis 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 in the past four or five years of observing real estate analysis and commentary is that economists, generally and collectively, have a very poor understanding of real estate markets, which is why they are so incredibly bad at predicting outcomes. But, ignoring that reality, the survey asked 49 people described as “leading economists” to respond to this question: "Here is a list of measures governments could take to increase housing affordability (to reduce the cost of purchasing or renting relative to wages). Which would you most support? Pick up to three." Among them, apparently, are former heads of government agencies, a former Reserve Bank board member, and former Treasury, International Monetary Fund and Organisation for Economic Co-operation and Development officials. Sadly, but rather typically, the poll didn’t include any property experts. Just a group of individuals who have typically occupied ivory towers a long way from the coal face of property markets. And here’s the next problem with this process: the tick-box options presented to the leading economists did NOT include the only measure likely to ease the rental shortage and therefore restrain rental increases – providing incentives for people to become landlords. You have to wonder why not. So, whoever designed the poll – yes, a group of economists – failed to understand the problems they were exploring. Of the options the panel of non-experts were given to choose from, two-thirds of them picked "ease planning restrictions" as most important fix. Almost as many picked "provide more public housing". So, most believe that creating more dwellings will fix everything. Which, again, shows a fundamental lack of understanding of the problems, how they were created and where the solutions lie. But it gets worse. About one-third wanted to "tighten negative gearing and capital gains tax concessions". You have to wonder about the thought process here. How does causing a major deterioration in the financial position of the people who provide the homes tenants occupy cause rents to fall? And given that investors are less than 20% of the buyers competing in the market, how does this stop prices from rising. Surely you would have to introduce measures to curtail home buyers, who comprise almost 80% of buyers competing in the market, if you wanted to stop prices from rising. Back to the survey: about a third of the respondents wanted to "replace stamp duty with land tax applying to family homes". Okay, so that’s a measure that might slow down home buyers a little. Also popular were removing barriers to building prefabricated homes (31 per cent), fast-tracking the training of h ome builders (18 per cent) and fast-tracking the immigration of home builders (14 per cent). Again, all are measures to increase housing supply and this appears to assume that building more dwellings will stop prices and rents from rising. Ten per cent of those surveyed wanted to include the family home in the age pension assets test, 8 per cent wanted to remove first homeowner grants and concessions, and 6 per cent wanted to apply capital gains tax to family homes. So, those measures at least at targeted on home buyers and appear to recognise their part in causing prices to rise, but these were the least popular of the tick-box choices. The most popular were all measures which assume that building more homes and curtailing property investors will fix all problems. But doesn’t explain how clamping down on the providers of rental homes will cause rents to fall – or stop prices from rising /episode/index/show/hotspotting/id/32787337

State of the States: Local Economies, Local Prices 08/22/2024

State of the States: Local Economies, Local Prices A question I get asked more than any other is where I see the Australian property market heading in the next 12 months OR what I expect to happen with Australian property prices this year or next year. And the answer I provide is usually delivered in multiple parts. Firstly, there is NO Australian property market. Although economists and journalists often refer to “the Australian property market” and predict what will happen with “Australian property prices”, the reality is that there is no such entity as the Australian property market. Secondly, what I expect to happen with prices depends on where, because we have so many different markets across the nation. Thirdly, real estate is local in nature and the market activity and the price movements depend on the local economy which underpins the location’s property market. Take a look at the price growth results among the eight capital cities for the past year and you will note that some have had boom growth, some moderate growth, some have stagnated and a few have had falling prices. All those different scenarios occurred within just the eight capital cities. There were similar variations occurring throughout all the regional markets. All those places sat within the same national economy, all had the same situation with interest rates and all were operating under the one Federal Government. Why, then, did we have all those different outcomes? And the answer is: Because real estate markets are very LOCAL in nature. The greatest influence on them is the local economy. So, if you want to understand a particular property market, first you need to understand everything that’s happening there in terms of the various local industry sectors, the infrastructure and other developments that are under way or in planning, and what’s happening with local jobs creation. Once you can understand whether the location’s economy is weak or strong, growing or stagnant or contracting, then you can begin to determine what might happen with property prices. For that reason, at Hotspotting we are always keenly interested in a quarterly report published by CommSec, called the State of the States report. This report uses a series of different metrics to rank the eight state and territory economies. And I have found, over many years, that there is a correlation between the strength of the state or territory economies and the performance of the capital city property markets. The past three quarterly editions of the State of The States report have ranked South Australia as the No.1 ranked economy in the nation, a finding that would surprise many people. But it doesn’t surprise the team at Hotspotting because we are very aware that the economy of Adelaide and South Australia is pumping strongly, helped by its status as the high tech innovation capital of the nation and the leading state for alternative energy developments. It also has a big education sector, a major military economy and a lot more. Coinciding with the rise and rise of the South Australian economy has been the rise and rise of the Adelaide property market. In 2023, Adelaide was the No.1 or the No.2 market in Australia for house price growth (depending on whose statistics you believe), in competition with Perth. PropTrack’s data showing the leading suburbs and towns in Australia for price growth in the four years since Covid arrived, finds that the top 5 suburbs in the nation for price growth performance were ALL affordable suburbs in Adelaide. In the latest edition of The State of the States, the No.2 ranked economy was (again) Western Australia - and again, there’s a clear correlation between that reality and the performance of Perth as one of the leading boom property markets in the nation. Melbourne and Victoria now rank No.3 on economic performance and this is one of several reasons why we believe that this market is poised for price growth in the next 12 months and beyond, coupled also with very strong population data and a significant program of big infrastructure projects. Consistently at the bottom of the CommSec report rankings is the Northern Territory – and it does not surprise us that Darwin has the weakest house price performance of all the capital cities in the past 12 months. Other economies with lukewarm economic performance are Tasmania and the ACT – and this corresponds with the poor price performance of the Hobart and Canberra housing markets in the past year. So this report, freely available to anyone who is interested, is one that’s worth following – because, read in conjunction with other data, it can provide clues about where prices are likely to rise in the near future. /episode/index/show/hotspotting/id/32688977

The Pulse August 2024 08/22/2024

The Pulse August 2024 Contemplate 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. /episode/index/show/hotspotting/id/32688877

Super Strategies – Building Wealth and Reducing Tax for Investors - Webinar Replay 08/21/2024

Why Property Investors Should Complete the PIPA Survey and Join PICA 08/14/2024

Why Property Investors Should Complete the PIPA Survey and Join PICA Episode Overview: In this insightful episode of the Hotspotting podcast, Tim Graham sits down with Ben Kingsley, the Chair of the Property Investors Council of Australia (PICA), to discuss the vital role that property investors play in shaping the future of Australia's real estate market. Ben provides an in-depth look at the importance of the PIPA Annual Investor Sentiment Survey and how it captures the pulse of the property investment community. Key Discussion Points: Importance of the PIPA Survey: Ben highlights why the PIPA Annual Investor Sentiment Survey is a critical tool for understanding the mood, confidence, and key trends in the Australian property market. He explains how the survey data influences media and policymakers and why it’s crucial for all property investors to participate. Advocacy through PICA: Tim and Ben delve into the advocacy work that PICA does on behalf of property investors. Ben shares how PICA ensures that investors' voices are heard in important policy discussions and how membership in PICA can help protect and advance investors' interests in the face of changing regulations. Membership Benefits: Ben outlines the many benefits of joining PICA, from staying informed about the latest changes in property law to networking with other like-minded investors. He also discusses how PICA members can access exclusive resources and support to enhance their investment journey. Current Market Challenges: The conversation also touches on the current challenges facing property investors, including new rental regulations and tax laws. Ben offers practical advice on how PICA membership can help navigate these complexities and safeguard investments. Why You Should Listen: Whether you're a seasoned property investor or just starting out, this episode is packed with valuable insights that will help you better understand the landscape of property investment in Australia. Learn how your participation in the PIPA survey can make a difference, and discover how PICA can support your investment goals. Don’t miss out on the opportunity to have your say in the PIPA Annual Investor Sentiment Survey and consider joining PICA to ensure your voice is heard in the property investment community. Visit Hotspotting.com.au for more resources and insights. Complete the survey here: Join Pica here: /episode/index/show/hotspotting/id/32571452

Home Ownership Dream Thrives 08/13/2024

Home Ownership Dream Thrives There are two opposing story lines circulating in news media about Australian real estate ownership. One story line, repeated regularly by media, is that the Great Australian Dream is dead and that young Australian adults can no longer afford to buy homes. The other one, revealed whenever the Australian Bureau of Statistics releases official data on real estate finance, tends to suggest that the dream is very much alive – and indeed thriving. In fact, the latest lending figures show major increases in buying activity by all types of real estate consumers, including first-home buyers. Media loves negative sensation about housing affordability and very often the truth is optional. Some organisations who crave publicity to lift the profile of their businesses regularly feed this weakness in news media by creating bogus reports about Australian housing affordability. They do this, usually, by applying a set of parameters that are irrelevant and unrealistic. Here’s a typical example: a so-called research organisation will create a report which examines how long it takes a young couple to save a 20% deposit to buy a house at the median price in Sydney or Melbourne. Or how much a person needs to earn to achieve a loan for this. Now, there are multiple reasons why this is a nonsense designed to create a headline rather than inform the public. These reports are full of furphies. Furphy No.1 – you don’t need a 20% deposit. You can get into real estate ownership with a 10% deposit or even a 5% deposit. Furphy No.2 – first-home buyers don’t buy at the median price in Sydney or Melbourne or anywhere else. They buy in the lower price ranges. The city median is irrelevant to the circumstances of young buyers and the issue of affordability. Furphy No.3 – these reports always overlook attached dwellings as an option for buyers seeking affordability. In many capital city suburbs, the median price for units is half the median price for houses. But these bogus reports never speak about this viable, popular and more affordable option. Why are these so-called research reports full of irrelevant and misleading information? Because the goal is NOT to inform people, or help people, or improve the situation for the community. The goal is always self-serving and dishonest – to create free publicity by generating alarm in the community. And journalists are happy to recycle this nonsense as factual news. In Sydney, the median house price is close to $1.5 million (according to CoreLogic) but that is irrelevant to people seeking affordability in our most expensive capital city. What is considerably MORE relevant is how much it costs to buy a unit in the Canterbury-Bankstown area of Sydney, where there are plenty of viable options in multiple suburbs in the price range from $400,000 to $600,000. Or what it costs to buy a house in more affordable parts of Greater Sydney, like the local government areas of Liverpool, Parramatta and Blacktown. And of course there is the reality that over 20 million Australians live in places other than Sydney and the median house price in our most expensive city is utterly irrelevant to them. How about some focus on what it costs to buy a house in the affordable northern suburbs of Adelaide, or an apartment in the inner-city Brisbane suburb of Bowen Hills, or in the inner-city Perth suburb of Belmont or a house in outer-ring areas of Greater Melbourne. And what about regional Australia, which is attracting growing numbers of new residents relocating from the biggest cities in search of a different lifestyle, empowered by technology that allows more and more people to work remotely. So, let me tell you, the home ownership dream is very much alive right across Australia. How can I be so sure? Because the official lending data confirms it. The latest stats from the ABS – which is for the month of June - shows we are currently seeing growing numbers of people buying homes as first-home buyers, other types of owner-occupier buyers and investors. Lending for the purchase of homes rose 19% in June, compared to a year earlier. In June lending to owner-occupier buyers was up 13% compared to a year earlier, with an even larger increase in loans to investors. There was also a rise in lending to first-home buyers, though not as large an increase. It should be fairly self-evident that lending levels would not be rising, including for first-home buyers, if it was true that no one can afford to buy any more. We have highly active property markets in most parts of Australia and buyers of all kinds are active. So, next time you see one of those shallow media headlines declaring that the dream is dead and that young Australians are priced out of the market, don’t believe it. /episode/index/show/hotspotting/id/32552122

Regional Victoria's Second-Wind Markets 08/13/2024

Regional Victoria's Second-Wind Markets The markets currently attracting our focus at Hotspotting are the ones we call “the second wind markets”. These are locations which experienced strong capital from 2020 to 2022, have been in the post-boom pause/correction phase for the past 18 months or so, and are now poised for another period of price growth. There are few better places to find second-wind markets than Regional Victoria, as many of the key centres have exhibited that pattern over the past 3-4 years and are now showing the early signs of revival. Many of the suburbs of Ballarat are classic examples. The median house price for Sebastopol rose from $330,000 in 2020 to $475,000 by the end of 2022. There has been a price correction in the past 18 months but market activity is rising again and another period of price growth is expected. Eaglehawk in Ballarat rose from $325,000 in mid-2020 to $520,000 in early 2023, before the price graph evened out over the following 12-18 months. Bendigo displays similar patterns. The suburb of California Gully had a median house price of $300,000 in 2020, rising to $465,000 late in 2022. The price graph has flatlined since then, before showing the first signs of new growth in mid-2024. Similarly, Flora Hill lifted its median house price from $255,000 in 2020 to $450,000 in early 2023 – but the price graph has been flat over the past 12 months. Now sales activity is rising again, which is a forward indicator of impending price growth. Other markets in Regional Victoria have this pattern, which is a common one in real estate cycles with a period of strong growth followed by a period of correction or no growth, before the market embarks on the next growth cycle. Shepparton, Traralgon, Mildura, Wodonga, Warrnambool and many other Victoria regional centres have this pattern. They’re all places with solid local economies and credentials for future growth. Most of them commonly have houses in the $400,000s and $500,000s, with low vacancy rates, so they present attractive features for property investors. /episode/index/show/hotspotting/id/32552072

Melbourne Market: Confusion or Opportunity? 08/13/2024

Melbourne Market: Confusion or Opportunity? You can be forgiven for being confused about the Melbourne market. On the one hand, news media is full of stories about investors shunning Australia’s largest city because of draconian taxes and policies by the nation’s worst state government. There are also frequent articles about the lack of price escalation in Melbourne markets, at a time when many other capital cities are delivering stellar capital growth. But this is balanced by the analysis from those who believe Melbourne to be a prime opportunity for buyers to get in early in a growth cycle, with the city’s markets poised for revival. A strong state economy, a big infrastructure program and some compelling population data support the view that Melbourne is overdue for a growth spurt. The first thing to understand is why Melbourne has underachieved in the past couple of years while others have excelled. The lingering impacts of the Covid period are considered at least partly responsible. Melbourne was locked down for longer than other Australian cities and was indeed dubbed by media as “the world’s most locked-down city”. There’s no doubt the attitudes and policies of Dictator Dan (Andrews) deterred many. And subsequent state policies unfriendly to investors – including the reality that Victoria has the highest stamp duty and the highest land tax in the nation – have deterred buyers from investing in Victoria. On the positive side, Melbourne is the nation’s biggest beneficiary of overseas migration, which made it a national leader on population growth last year. Australia experienced a record number of new additions to the national population in 2023, with 84% of it attributed to overseas migrants. So Melbourne, despite losing residents to internal migration (people moving to other parts of the nation), grew its population by almost 3% last year. Only Western Australia had higher growth. Victoria consistently ranks among the nation’s leading economies and ranked third in the July 2024 edition of the State of the States report by CommSec. The July report comments that Melbourne is consistently strong across all the metrics used to rank the states and territories, which include population growth, construction work, housing finance, retail spending and employment performance. A strong economy underpins the residential real estate market, because it means there is busy economic activity creating jobs, and from that springs demand for homes. A key factor keeping the Victorian economy vibrant is the big program of infrastructure development across Greater Melbourne. They include multi-billion-dollar developments now under construction like the Suburban Rail Loop, North East Link, Metro Tunnel and West Gate Tunnel – which combined are estimated to cost over $70 billion. Those projects alone – and there many others impacting the city – are likely to energise the local economy in ways likely to lead to growth in demand for homes. So there’s a plausible argument that now is an opportune time to be considering investment in Melbourne, rather than doing what many investors do, which is dive into markets when they read there’s a boom on. Far smarter to buy before the boom starts. /episode/index/show/hotspotting/id/32552037

Rise of Units 08/12/2024

Rise of Units The trend we have termed “The Rise and Rise of Apartments” continues to pick up pace. Across Australia, more and more buyers are opting for attached dwellings for lifestyle, for affordability, for convenience and for safety. One of the features that draws growing numbers of buyers (and tenants) to apartments is location appeal. Not only do attached dwellings allow people to access property in good locations at cheaper prices than houses, but the average unit is better located than the average house. A report titled “Measuring Home Price Differences” by Infrastructure Victoria has found that units consistently trump houses on proximity to desirable features. “Units are located closer to selected infrastructure types, on average, than houses and townhouses,” the report says. The report found that units were far more likely to be located close to train stations, tram stops, major activity centres and arterial roads than houses. “About 60% of units are within 1.6km of a tram stop, while this distance only includes about 20% of houses,” the report says. This is one of multiple factors driving higher demand for units – challenging the dominant paradigm of real estate. That paradigm, still widely accepted in the real estate industry, states that houses always outperform units and townhouses on capital growth. But that is undoubtedly changing. We are seeing growing evidence that more and more buyers of various sorts are opting for attached dwellings. Buyer demand in locations where units dominate the dwelling mix - or are a significant part of the dwelling mix - has been rising notably for the past 12-18 months. Suburbs where units prominent are now among the most powerful markets in Australia – which makes our Top 10 Apartment Hotspots report essential reading for investors seeking opportunities in 2024 and beyond. Those seeking out well-located and affordable apartments include older people downsizing from a large family home. They also include … young people seeking an affordable first step on the property ladder; lifestyle buyers seeking low-maintenance, lock-up-and-leave options in good locations; overseas migrants from countries where unit-style living is the norm; investors seeking affordability and higher rental yields in good locations; and buyers who seek the security and safety of an apartment above ground level. In inner-city precincts in our biggest cities, houses can typically cost over $2 million, but apartments can be bought in the $600,000s and $700,000s in the same suburbs in many cases. The rental yields are also significantly higher, a key consideration in times of higher interest rates – although it needs to be remembered that apartments do entail additional costs like body corporate fees. But the most noteworthy data relates to capital growth. In a growing number of locations throughout Australia, apartments have recorded larger increases in median prices than houses, both in the past year and over the longer term. At Surfers Paradise on the Gold Coast, apartments are considerably cheaper than houses, sell faster, have higher rental yields, have recorded bigger price growth in the past year – and the long-term capital growth rate also is superior. There are many, many more examples like this across Australia. New data from CoreLogic shows that apartment values are rising faster than those of houses in about six out of 10 suburbs. This is also reflected in the general results for many of our major cities. In the past three months, the median price for units in Brisbane rose 5.8 per cent, while houses increased 3.4 per cent. Adelaide units outperformed houses by the same margin after increasing by 7.1 per cent during the same period. across Sydney, Melbourne, Perth and Hobart, although they have fallen behind in Darwin and Canberra. Across the combined capital cities, unit values rose faster than house values in 506 suburbs out of a total of 855 suburbs, with some unit markets gaining more than seven times more than houses. /episode/index/show/hotspotting/id/32551807

Greens Housing Policies 08/06/2024

Greens Housing Policies The official data shows that the cornerstone of the financial wellbeing of most Australian households is the family home. Over two-thirds of the household wealth in this country is residential property and, for most of them, this means their home - as most people don’t own investment properties. The family home is the foundation of the financial security of most people and its value underpins people’s lives and their sense of security - and, in particular, their retirement. The good news is that household wealth nationally grew 10% in the past year and 68% of that wealth resides in the residence. The bad news is that if the Greens have their way, all of that will be decimated. Their policy for real estate is to force the value of your home to fall - a lot. And if you’re performing one of society’s most important functions, providing a home for others to live in as tenants, the Greens want you to be rubbed out. Not just curtailed, but eliminated. Now, we’ve known for some time that the Greens are anti real estate and, in particular, hostile towards anyone who owns an investment property, even though these are the people who provide 91% of the homes that tenants occupy in Australia - and they’re in extreme short supply. If the Greens have their way, ownership of investment properties will cease to exist in Australia - although, at the same time, they have no policy about who will provide the 3.2 million rental homes that investors currently provide. But it gets worse, because the Greens plan is to force down the value of everyone’s home. They apparently believe that this is how you deal with the issue of housing affordability. One thing that is abundantly clear is, rather tragically, that no one in the Greens has any understanding of Australian property markets. They have no comprehension of how the cost of housing became so high, no clue as to how rental properties became so scarce, no understanding of why prices rise and no sensitivity to how important the value of the family home is in the life of the nation. Because everything they propose to do, if they ever gained power, would make all of these issues infinitely worse and would decimate the structure of one of society’s most fundamental needs, shelter. Observing the Greens espouse economic and real estate policy is like watching primary school kids talk about stuff they think is cool. Imagine if you could have anything you wanted and it doesn’t matter how much it costs and whether it’s really possible or not. The Greens apparently don’t consider it necessary to cost their policies or to consider the consequences of their pixie-eyed plans. Just one example: in the election campaign of local government in Queensland earlier this year, a key policy plank was fast rail connecting Brisbane, the Gold Coast, Toowoomba and the Sunshine Coast. There were no costings and no funding proposals for a plan, if you can call it that, which would cost many tens of billions of dollars. They also said they would build hundreds of affordable homes on the site for the Eagle Farm race course In Brisbane and it would all cost no more than $40 million, glossing nonchalantly over the fact that the race course land has an owner not keen to cease operations, and that land alone is worth hundreds of millions of dollars, never mind the cost of construction of hundreds of homes. But returning to their policy of smashing the value of family homes. Imagine if you’re a young couple who saved a 10% deposit and bought a first home for $600,000 and you have a mortgage of around $550,000. If the Greens had their way, your new home would be worth less than the size of your mortgage. You would be in a position of negative equity and you would be in an extremely vulnerable position. Your bank would be highly concerned and everything you have worked, saved and sacrificed for would be at risk. Now multiply that by millions of other households and you have a financial, economic and personal disaster of galactic proportions. And that’s apparently what the Greens want for Australia. Two-thirds of Australian families own their homes and most would be alarmed at the scenario that the Greens think is fair, reasonable and desirable. But even more fanciful than the Greens’ objective of destroying the value of our homes is the means by which they say they’ll achieve it. Their stated plan is to scrap negative gearing and increase capital gains tax. This apparently, miraculously, will cause the collapse of property values in Australia. The Greens believe that the owners of investment properties in Australia are a criminal class and the source of all evil in the housing market. Smashing investors will fix everything, apparently, including housing affordability, the rental shortage and the ongoing increase in rents. No one cares what happens to investors, in the Greens’ mindset, because they’re all rich bastards who own 15 or 20 properties and earn millions of dollars a year - right? Well, no. Here’s the reality. The typical investor is a young Australian who earns less than $100,000 a year and owns just one property or is buying their first. They’re not wealthy, they’re not inherently evil and because they cannot afford to spend big, they’re buying at the lower end of the market and are limited in how much they can spend on a property. They comprise perhaps 30% of buyers in the market. The other 70% are home buyers and the largest and wealthiest cohort in the market are home buyers other than first-home buyers. They own their existing home, they have equity, they’re older with higher incomes, they can borrow more than first-home buyers and typical investors, and they’re aspirational. They’re the ones most likely to be pushing up dwelling values. Investors are limited in their borrowing capacity and seriously disadvantaged in the market, because they have to pay higher interest rates, higher stamp duty, higher insurance, higher council rates - plus they have to pay taxes that home buyers don’t have to pay, like land tax and capital gains tax. The Greens say they are privileged and advantaged – but clearly the opposite is true. Australia scrapped negative gearing in the 1980s and it didn’t stop prices from rising. But it did create a rental shortage, so a couple of years later the then Labor Government reinstated negative gearing. New Zealand scrapped negative gearing in 2021 and dwelling prices kept rising. It was only later, when interest rates went extremely high, much higher than Australia, that NZ prices stopped rising. But it did make rental properties scarce so New Zealand is now in the process of bringing back negative gearing. But do the Greens care about any of that? The answer is that the Greens don’t know any of that because they don’t bother themselves with annoying things like knowledge or research. They’re the spoiled brats of Australian politics and, if they have their way, you’re going to lose a big chunk of your wealth. Be afraid, be very afraid. /episode/index/show/hotspotting/id/32455127

The Rental Shortage We Deserve 08/06/2024

The Rental Shortage We Deserve There are many unhappy aspects of the rental shortage crisis that has afflicted Australia for several years and is likely to continue for many years into the future. But the saddest thing of all about this unprecedented calamity is that Australia deserves the pain it’s experiencing on this issue. Firstly, there’s the old adage that we get the politicians we deserve. And the politicians we’ve elected – at both state and federal levels - have created the rental shortage through a series of bad policies. They keep making it worse with further unhelpful decisions. The problem has been exacerbated by news media and by the attitudes of many citizens. It’s a sad truth in Australia that when a serious problem arises, it’s very rare that we find and implement solutions. What we do, instead, to identify scapegoats - usually unfairly and inaccurately. Then we demonize the people we have decided to blame for the problem. But we don’t fix the problem. The demonizing of the wrong people usually makes it worse. So it is with the rental shortage crisis. The extreme under-supply has been created because fewer and fewer people want to be landlords. And why would you? You have to pay taxes no one else pays, like land tax and capital gains tax, you have to pay higher council rates, higher stamp duty, higher interest rates and higher insurance premiums. Every time a state government changes the rental laws, they are grossly biased towards tenants and often completely disregard the rights and needs of the people who own the properties that people rent. Meanwhile, investor owners are vilified and demonized by dishonest politicians and journalists for whom the truth is optional while they’re espousing their personal viewpoints dressed up as news. And, on the sidelines, large sections of the media and small-minded citizens cheer enthusiastically, while complaining about the rental shortage. One journalist who got it right recently was the personal finance writer for The Australian, Anthony Keane, who commented that owning an investment property in this country has now become a source of stigma and shame. He wrote: “Buying an investment property used to make me feel proud, but now it borders on shame. Surely, that’s not how we want Australians to feel for trying to build financial security and reduce their reliance on welfare later in life.” He also commented: “Chopping down tall poppies can be a national pastime, but ATO figures show that most of Australia’s rental property owners have just one property. Many are teachers, nurses, police officers and emergency service workers. Since when did they become tall poppies?” he said. Some people try to be tall by cutting off the heads of others. In other words, as Anthony Keane pointed out, we’re talking about the tall poppy syndrome and the politics of envy. For many Australians, if they observe others apparently doing better than they are, they will support policies to squash those people. Apparently, they are unaware that this is what has created the rental shortage and the rising rents that everyone is complaining about. Which I why I say that, sadly, Australia has got the housing crisis it deserves. Until the nation changes its attitudes, this problem will not only continue, but get worse. Sooner or later, Australia will have to acknowledge that investors are not the problem, they are the solution. /episode/index/show/hotspotting/id/32455107

Gold Coast Shortage 08/06/2024

Gold Coast Shortage The reality of the nation’s serious under-supply of homes is made starkly obvious by the emergence of shortages in the location best known for bouts of major over-supply. The Gold Coast, which traditionally has delivered weak capital growth because of regular periods of over-supply of high-rise apartments, these days has the opposite problem. The Gold Coast has been trending towards under-supply for the past 2-3 years and it’s getting worse - and will continue to do so for the foreseeable future. The Gold Coast has long been one of the nation’s most spectacular population growth venues and currently has a population of about 700,000 - making it the largest regional city in Australia. It’s projected to reach a million residents within the next 20 years. This notable history of population growth and the allowance of mega high-rise buildings has made the Gold Coast a prime target for big developers - and there have been many periods of massive construction of mega towers. Often this has resulted in over-supply, which has taken the market years to absorb. Up until about three years ago, the median apartment price for Surfers Paradise was at the same level as a decade earlier - in other words, no capital growth for 10 years. But that has all changed. The population growth has continued and in recent years demand has risen. The trend we call the Exodus to Affordable Lifestyle has increased demand for appealing coastal cities and the Covid lockdown period increased buyer demand for the Gold Coast. In the meantime, the level of major new construction has declined dramatically. Quite simply, many developers have done their sums and concluded that 40 and 50 storey apartment towers don’t stack up financially. The costs of building these structures have escalated to the point where the end price developers would have to charge to be profitable would be beyond the market’s capacity or willingness to pay. One of Queensland’s biggest and most experienced developers told me recently they could not commit to a high-rise building unless they believed they could sell the apartments for a minimum of $1 million each. Many big developers have decided that, with costs growing so fast, it’s difficult to budget for the cost of the development that takes years to plan and construct. So big developers have cancelled or deferred projects. According to a recent report by experienced Queensland property analyst Michael Matusik, for a number of years before 2021 the Gold Coast market was producing enough new dwellings to meet the demand from its rising population - indeed, a little above the required levels in some years. But since 2021 that has changed dramatically. The line on the graph depicting supply has fallen more and more below the line representing underlying demand. The Gold Coast market is now in severe under-supply and likely to get worse. It’s a national problem with the Gold Coast providing a snapshot of a broader Australia-wide issue for which our elected representatives appear to have no solutions. /episode/index/show/hotspotting/id/32455082

How Service Stations Can Fuel Your Investment Portfolio 07/31/2024

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

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