At a time when Australia is buckling under the weight of the dwelling shortage problem, population growth is occurring at record levels, mostly because we are bringing in migrants at unprecedented levels. The latest data from the ABS shows that the national population rose 2.5% last year. That means 660,000 added to the Australian population, lifting the total close to 27 million – which is a milestone achieved well ahead of the official government forecasts. This historically high level of population growth has been fuelled by new people arriving from overseas. Overseas migration, in fact, accounted for 83% of the increase in population last year, with the rest achieved with “natural increase”, which means that births exceeded deaths. Net overseas migration was 548,800 – up 60% compared to the previous year. Those numbers, startling as they are, beg one very big question: where are they all going to live? We already have an unprecedented shortage of dwellings in this country, especially dwellings available for rental. The current national vacancy rate, according to Domain, is 0.7%. Six of the eight capital cities have vacancy rates well below 1%. The building industry is unable – for a host of reasons - to produce new dwellings at the rate required to keep up with the rapid growth in household formation. Vacancies are destined to go on falling and the serious under-supply of dwellings will not only continue, but get worse. And that means the upward pressure on prices and rents will continue.  

Australian Population Surge

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The silliest people skulking around the edges of the property industry are the shallow attention-seekers who pump out nonsense reports claiming that no one can afford to buy property – not because it’s true or useful, but simply to drum up some free publicity for the business who is the source of the misinformation. The shallowness and pointlessness of these reports is demonstrated by the results being seen in property markets, which emphatically contradict the notion that most people can’t buy homes because they’re unaffordable to the vast majority. We are constantly inundated with reports claiming young Australians are priced out of the property market and doomed to a life-time of renting – but the latest official data shows there has been a 13% annual increase in the number of loans to first-home buyers. The attention-seeking report writers claim no one can afford to buy, but first-timers are out there buying homes in rising numbers. Beyond the apparently dire plight of young buyers, there are growing instances of reports saying most households are priced out of the market, not just the first-timers, and that our real estate is unaffordable to the vast majority of people. And yet, in stark contrast to those claims, our markets are extremely busy with buyers in all price ranges - and prices continue to rise steadily. Here’s the thing: if you want to achieve cheap and easy publicity for yourself or your business, the fast-track is to publish alleged research on housing affordability – and to guarantee maximum coverage, your so-called report needs to conclude that it’s a dire situation and hardly anyone can afford to buy homes. Media loves that story line and will publish it every time, despite the fact that they ran the same or a similar story last week, and the week before, and the week before that. Apparently journalists believe we all have an insatiable appetite for lies about housing affordability. The sad reality is that it’s really easy to pump out a report with negative findings - because the report writer gets to decide their own definitions of affordable and unaffordable. It’s completely random and arbitrary – but the creators of these shallow documents pretending to be research can rest easy in the knowledge that no journalist will ever challenge them on their definitions and parameters, nor ever question their findings. They’ll go for the easy option of the cheap headline, every single time. Recently one of the big four banks produced a particularly scurrilous and worthless press release, pretending to be serious research, which found that only 13% of homes in Australia are affordable for buyers. Now, if that was true, property markets across the nation would be largely dormant. There would be few sales occurring and prices would be falling in most markets. Of course, the opposite is happening. Current sales levels across Australia are 24% higher than the same time last year and prices are rising in most markets across Australia. How can these two contradictory things be happening? It’s because the report in question is shallow nonsense. And we shouldn’t be surprised that a major bank would produce a dishonest document to generate publicity – we all know from the royal commission and from our own personal experiences that the big banks are very comfortable with being unethical in the pursuit of profits. So we’re not surprised to see National Australia Bank producing a headline-grabbing report that was based on the principle that you should never let the facts get in the way of a cheap headline. When you’re a big four bank using the media, the truth is always optional – and indeed usually rather inconvenient. So, here’s what the NAB report claimed – and, to their credit, they managed to keep a straight face while talking about it. They said that just 13% of the homes that are for sale in Australia are affordable to the average household. Presumably that means that 87% of the homes for sale across the nation won’t sell because they’re beyond the financial reach of most of us. How did they manage to come up with this implausible scenario, which is contradicted by what’s happening the market every single day? By deciding, in the interests of a screaming headline, that if you have to spend more than 25% of household income on servicing the mortgage, then it’s unaffordable. Who says that this is the definition of unaffordable? Well, the National Australia Bank, because if they’d used a realistic benchmark that’s in line with the reality of most households with mortgages, they would NOT have been able to claim that most homes are unaffordable and they wouldn’t have got any publicity. If NAB was right, of course, and spending more than a quarter of the household income on the mortgage WAS unaffordable, then mortgage delinquency rates in Australia would be sky-high. But they’re not. The mortgage delinquency rate in Australia, according to S&Ps;, is just 1.4%. Yes, slightly more than 1% of people with mortgages are behind on their payments. Which means over 98% of home-owners are paying their mortgage on time, which means they’re finding it affordable, even though some might be finding it difficult. But according to the NAB report, that cannot be true, because 87% of homes, and the loans needed to buy them, are unaffordable – according to them. Sadly, this is just another case of economists demanding that property markets behave the way they think they should, rather than observing the way markets are actually behaving, and trying to understand why.

Unaffordable Twaddle

It’s remarkable how many politicians think that the solution to every problem that afflicts the housing market is to scrap negative gearing and make other changes to drum investors out of existence. Want to fix the rental shortage? Scrap negative gearing. Make housing more affordable? Scrap negative gearing. Facilitate the construction of a million new homes in Australia? Scrap negative gearing. The illogic of these attitudes – and the way they run counter to the truth – is quite remarkable. And, while it’s become quite common for politicians and others to recommend the end to negative gearing tax benefits, none of those advocates have been able to explain how that measure would lift rental supply or improve housing affordability. When asked for numbers, they don’t have any. Those who hold to the view that massively punishing property investors will solve all the ills in the housing industry should ask themselves a few basic questions. Why is it that Australia abolished negative gearing in the 1980s but within two years had reinstated it? Why is that New Zealand, in similar fashion, banned negative gearing three years ago and is now in the process of bringing it back in? And why is it Ireland, that ended negative gearing some years ago as well as increasing taxes on investors, now has a rental shortage catastrophe far worse than Australia has now? History shows that every time a nation decides to scapegoat and punish property investors, rather than implement real solutions to housing problems, they end with a situation far worse than they started with. NZ did it, partly based on the theory that deterring investors would put a lid on property prices and make homes more affordable. But NZ house prices soared, because it was home buyers pushing up prices, not investors. Rents also rose sharply in NZ, because many investors dropped out of the market, causing a serious rental shortage. So it’s alarming to see politicians seeking attention – and I have to say it’s usually minor parties like the Greens or independents who are grandstanding – constantly declaring that anti-investor policies will fix all the housing problems. The latest “look at me” politician to do this is the loud and bogan independent Jacqui Lambie. I’ve been observing Jacquie Lambie for a long time – let’s face it, she loves the limelight - and she has always struck me as someone who desperately needs counselling – constantly angry, always bombastically shouting about something or at someone - and desperately unable to articulate a coherent sentence, so it’s always difficult to understand why she’s so worked up. So it really shouldn’t surprise me that she called a press conference recently to declare that if we wipe out negative gearing it’ll fix the rental shortage. But was unable to explain exactly how that would work. Because it wouldn’t work. It would achieve the opposite. She also claims it would cause house prices to drop – which perpetuates the myth that somehow negatively-geared investors are the reason prices rise in Australia. My estimate is that less than 20% of buyers in the market are negatively-geared investors. What we’re being asked to accept is that this small minority of buyers somehow overpowers the 80% plus of buyers who are home buyers or investors not claiming negative-gearing tax benefits, such as myself. The largest and most powerful cohort in the market at any point in time, including right now, are home buyers other than first-home buyers. They are older, with higher incomes, they have equity in their existing homes, and they have considerable borrowing power – far more so than first-home buyers OR investors. The politicians who are most vocal about squashing investors are the Greens, who would, if they had the chance, cap rents, scrap negative gearing, increase capital gains tax and impose other taxes on investors. To get an impression of the impact that would have on the Australian rental market, if it ever happened, we can observe the situation in Ireland, which implemented very similar policies some years ago. Today Ireland has a rental shortage catastrophe, far worse that the crisis in Australia. Among the various reports and analysis I found on the Ireland market situation, were these comments: “Ireland has been grappling with a severe housing crisis for over a decade, characterized by a shortage of affordable and suitable homes, rising housing costs and rents, and increasing homelessness. This crisis has had a profound impact on individuals, families, and the country's economy as a whole.” And here’s another comment on the situation in that country: “Ireland's rental market is a daunting place for households in 2024 and with demand far outweighing supply, finding somewhere to live has become increasingly difficult if not impossible. One of the biggest reasons why Ireland is facing a housing crisis is due to lower investment by developers and landlords.” Well, if you’re going to impose policies that squash the people who supply the product that’s in short supply, what do you expect?! In Australia, an open house for a vacant rental home will commonly attract 15 or 20 people wanting to rent it. In Ireland, the queue at a rental open house stretches out the door and down the street, literally for hundreds of metres. Those are the consequences Australia faces if it ever implements the policies advocated by Jacqui Lambie – or the even more extreme ideas advocated by the Greens. Let’s face it, this is nothing more than the politics of envy. Rantings from people with no vision or intelligence or expertise, just a nagging feeling that someone is better off than they are, so they need to be stopped. And to hell with the consequences.  

Negative Gearing

Tune in to the latest episode of the Hotspotting Podcast with your host Tim Graham who sits down with special guest Scott Parry, founder of Crown Money. In this informative and eye-opening webinar, Scott shares his journey from starting out as a young mortgage broker to founding Crown Money, a company focused on helping people achieve their financial goals and becoming debt-free. Crown Money clients on on average pay off their mortgages within 12 years, and Scott is calling a client every 23 days to congratulate them on being debt free! The episode dives deep into the topic of mortgages and how it can either be a tool for achieving financial freedom or a trap that keeps people in debt. Scott discusses the common mistakes people make when taking out a mortgage and shares valuable tips on how to master your mortgage for a debt-free future. With his years of experience and a passion for helping people achieve their financial goals, Scott shares valuable insights on how to pay off your home faster and become financially free.  Don't miss this insightful conversation that will change the way you think about mortgages and take a step towards achieving true financial freedom. To catch the full webinar, you can watch it on YouTube here. To learn more about Crown Money Management, please visit https://crownmoneymanagement.com.au/ 1300 882 981 Finance Tracking software:  https://myprosperity.com.au/accounts/account/register?cobrand=crownmoney Book a meeting with Scott  https://meetings.hubspot.com/scottparry/video-meeting?uuid=d3a46d42-93bd-461a-a9aa-c857222678cb  

Financial Freedom Starts at Home: Pay Off Your Mortgage In Record Time

One of the fundamentals of understanding real estate dynamics is remembering that real estate markets are local in nature – and they are influenced by the local economy in which they sit, far more than by national factors. 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. Take a look at the price growth results among the eight capital cities for last year and you will note that some had boom growth, some had moderate growth, some stagnated and a few had falling prices.  All those different scenarios occurred within just the eight 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? Because real estate markets are very LOCAL in nature. The greatest influence on them is the local economy. 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 two 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. In the latest edition, South Australia was ranked No.1 on four different indicators. 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. 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 affordable Adelaide. In the latest edition of The State of the States, the No.2 ranked economy was Perth - 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 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 2024, coupled also with very strong population data and a recent uplift in sales activity. Consistently at the bottom of the CommSec report rankings is the Northern Territory, with its biggest weakness in the latest quarterly edition being housing finance – 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 able 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.  

State of the States

Are you ready to take your investment journey to the next level?   Look no further, because we have exciting news to share with you! We are thrilled to announce our new Hotspotting pre-recorded interviews with some of the top 1% of Australian investors who own 5 or more properties. As you may know, in the 2020-2021 financial year, only 0.87% of investors in Australia owned 5 or more investment properties. But what do these successful investors know that the majority don't? We have sat down with a number of them to get exclusive insights into their strategies, tips, and personal journeys. Our pre-recorded interviews bring you valuable knowledge and advice from Australian property experts who walk the walk and practice what they preach. Learn from their mistakes, successes, and unique perspectives on property investment. These interviews are a must-watch for anyone looking to build a successful investment portfolio and achieve financial freedom. With over 71% of investors owning only one investment property, we understand the challenges and uncertainties that come with growing your portfolio. That's why we have curated a series of interviews that exclusively feature investors with multiple properties. They represent the top 1% of Australian investors and have achieved remarkable success in their investment journey. Our pre-recorded interviews are available for you to watch at your convenience, so you can take in all the knowledge and insights at your own pace. Hear firsthand how they navigate the ever-changing property market and make profitable investment decisions. You'll be able to walk away with practical tips and strategies that you can implement in your own investment journey. About Kate Hill Kate is an avid property investor with many years of firsthand experience buying and researching real estate. She founded Adviseable after many years as a Property Coach and Mentor. An accomplished Property Investment Adviser, Kate has facilitated hundreds of successful property investment purchases and has been named among the top 2 Your Investment Property magazine’s Advisers of the Year in Australia. She has also featured prolifically in the national media, commenting on TV, the press, radio and podcasts. Kate is the co-author of the book The Female Investor: Building Wealth Security and Freedom Through Property Kate’s success as an adviser can be attributed to her keen sense of matching property with buyers, her knack for identifying outstanding property investment opportunities, and her tenacious negotiation skills. It’s these qualities that enable our clients to feel comfortable throughout the purchase process knowing that she’s in their corner. Kate has a significant and growing property investment portfolio herself, and her personal philosophy is simple; “focus on results, and always buy property with maximum growth potential”. When she’s not immersed in research material in an effort to uncover the latest property investment hot-spots, Kate enjoys competing in ocean swim events, long-distance running, cinema or relaxing with a good book. www.adviseable.com.au

Australian Population Surge

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