Hotspotting

The Melbourne market has staged a remarkable turnaround, transitioning from a struggling market to one showing promise of considerable buoyancy in the near future.

Three months ago we reported the first signs of recovery across Greater Melbourne markets, but our latest quarterly survey of sales activity has provided compelling evidence that Melbourne is now coming back strongly.

The number of locations classified as rising markets has increased five-fold and recovering markets have quadrupled, while plateau markets have halved and the number of declining suburbs has dropped by 67 to just 9.

That’s quite a turnaround.

I should be accustomed to watching politicians failing to fix problems, but somehow I can never get used to it.

The capacity for Australian politicians to blunder when we need them to excel is quite extraordinary.

And I think part of the problem is that politicians are really only interested in the press conference and haven’t thought much beyond that.

And so it is with the political response to the housing crisis.

The Prime Minister got together with all the state and territory premiers and first ministers to talk about fixing the housing shortage.

These are our national leaders, the people we have elected to fix problems - like not enough dwellings, the absence of affordability and the sharp rise in residential rents.

So they got together and talked about it and then held a press conference in front of the assembled media.

What they presented was laughable.

1. Is 2023 a time of opportunity for property investors?
2. Where are investors getting good results from capital growth and rental returns?
3. Which regions have the best growth indicators?
4. Is this a good time for investors to undertake new builds?
5. Should investors be deterred by politicians tinkering with the market?
6. Where do you go for accurate information and sensible advice?

Media loves to place great significance on insignificant data, with month-to- month changes in prices, rents, vacancies and building approvals given implications and connotations that they simply don’t deserve. The advice, as always, is to ignore them.

Some property owners use short-term letting rather than long-term residential tenants and they’ve been blamed by some in politics for the rental shortage – but an independent university study has confirmed what we already know, that Airbnb has not caused the national rental shortage crisis.

The history of residential real estate in Australia is, in one sense, a story of defiance. Economists and journalists keep predicting dire outcomes and property markets keep proving them wrong. 2023 has provided a wonderful case study for that. The year began with a plethora of predictions from the usual suspects – senior economists working for the Big 4 banks, the nation’s worst real estate forecaster Shane Oliver from AMP Capital, and a host of others. The common feature of their forecasts was that prices, they said, would fall in 2023.

A journalist on a national publication recently asked this question: “Should we be listening any more?” The writer was referring to the latest property price forecasts from National Australia Bank and pointed out NAB’s terrible record on predicting house prices. I wholeheartedly agree. I wish more journalists would challenge the major banks on their real estate predictions. It’s not just NAB: the property forecast track record of senior economists employed by all of the Big 4 banks is laughably bad. I often wonder how senior economists working for Westpac, ANZ, NAB and CommBank keep their jobs, given how often they predict negative price outcomes and are proven spectacularly wrong.

Dictator Dan Andrews, Premier of Victoria, leads Australia on a number of issues. When it comes to arrogance, incompetence, dishonesty and bad governance, there’s no politician anywhere in Australia, at any level of government, who can match Dan in any of those areas. Announcing this time last year that Regional Victoria would host the Commonwealth Games, that it wouldn’t cost much and the benefits would be huge – and then 12 months later scrapping the Games, claiming they would cost too much and there would be no benefits – that alone marks Dictator Dan as a politician setting new standards in bizarre behaviour and stunning incompetence. But there’s a lot more to worry about with this obnoxious individual – he has single-handedly made Victoria a No Go Zone for property investors – passing laws that are onerous to property owners and have significantly increased their costs of ownership, increasing stamp duty for certain types of purchases, announcing big increases in land tax and then announcing plans to bring in a rental cap. So, having massively increased the costs for property owners, he is declaring that those owners cannot increase their price.

Real estate research data is telling an increasingly strong story for apartment markets across Australia. Apartments, so long considered inferior to houses on land for investment solidity and long- term capital growth, are mounting a serious challenge to the supremacy of houses in the minds of Australian investors. In recent times, apartments have proved competitive with houses on capital growth and are out-performing houses on rental growth. More and more Australians are opting to live in units and townhouses for their lifestyle and affordability features. And apartments are grabbing an increasing share of the construction market with builders and developers.

One of the most significant things happening in property markets across Australia is that rental yields are continuing to rise even in markets where prices are rising.

What that means is that rents are rising faster than prices, in many locations.

I’ve been working recently on updating the data for one of our premium products for real estate professionals, the report we call The Pulse, which is published quarterly.

The Pulse identifies the Top 50 locations around the nation with above-average rental yields, as well as solid prospects for capital growth.

It’s a key report because even though the RBA has stopped lifting interest rates, the rate rises we’ve had in the past 12-15 months have made it much harder for investors to afford all the costs of ownership.