Hotspotting

Recently there have been media headlines along the lines of “Rental crisis shows no sign of softening”, as if there was an expectation that vacancies should be rising and rents easing.

Of course there are no signs of the rental shortage crisis softening.
It’s going to get considerably worse before it gets better.

There are few things in life, or in real estate for that matter, that are sure things – but this is an absolute certainty.

The rental shortage crisis WILL get worse, from the viewpoint of people looking for a place
to rent.

The good news about interest rates is that it appears we are at, or near, the end of the cycle of rising mortgage rates.

That’s if you can believe the words of the Reserve Bank Governor, Philip Lowe.

But of course, we can’t believe him because he’s the guy who kept telling us he wouldn’t be lifting interest rates before 2024, just months before he started lifting interest rates 10 months in a row.

That’s Philip Lowe who earns over $1 million a year and bought his Sydney home with a special cut-price loan available only to elite privileged people, so he doesn’t understand the pain he’s inflicting on households around Australia.

One of the best ways to be sure that a property market will be a good performer long-term is to confirm that it’s under-pinned by a strong local economy.

I believe property markets are local in nature and that the strength or otherwise of property markets depends largely on events in their local economies.

So we at Hotspotting are always interested in the economic activity that’s happening in the background, in assessing property markets.

• Is the local economy strong and diversified?
• Is the local economy creating jobs?
• Is the population growing?
• Is there investment in infrastructure happening and/or in planning?

If the answer to all those questions is yes, then there’s a good possibility that the local market you’re looking at will produce growth in its property prices.

Regional Queensland has a significant number of large regional cities with growth economies and big infrastructure spends – but which also offer attractively affordable house prices and higher yields to compensate for rising interest rates.

It’s become abundantly and alarmingly clear that the Federal Government is coming for us with new taxes on real estate and superannuation.

Headed by Federal Treasurer Jim Chalmers, the Government clearly has plans for more and higher taxes on real estate, with not even the family home safe from the intrusion of capital gains tax.

Asked repeatedly by various media representatives to rule out dumping a tax on the family home, Federal Treasurer Jim Chalmers repeatedly refused to do so.

This is scary, scary stuff.

There is a growing body of evidence that property market conditions are strengthening.

Against a backdrop of an ever-tightening rental market and increasing rents, there are signs of rising buyer activity and stronger prices.

Auction clearance rates are showing steady improvement in recent weeks and a number of research entities are recording price growth, in defiance of high inflation, rising interest rates and relentlessly negative media.

The more positive data began with the release of Domain’s price report for the December Quarter.

This recorded house price growth in five of the eight capital cities.

Then came figures from SQM Research which showed most capital cities recorded price growth in January for houses - and all but one of them recorded growth in median prices for apartments.

Brisbane and Queensland are among the biggest targets for property investors in 2023 - and for very good reasons.

In many respects, when it comes to the key factors that drive real estate markets forward, all roads lead to Queensland.

Investors seeking the best place to put their money want to see a strong economy, they want to know that the population is growing, that big money is being spent on new infrastructure and that there is growing focus on the region they’re targeting.

They also want real estate that’s affordable, where demand from tenants is strong and rents are growing, and in many cases in the current climate they want above average rental yields.

Queensland and its state capital tick all those boxes.

The new edition of our Top 5 Brisbane Hotspots report is essential reading for anyone thinking of getting into the Brisbane market. Grab Your Copy today

One of the things you’ll never get from Australian media is a Mea Culpa.

Media will never apologise for getting it wrong or causing harm or grief to the people of Australia, unless they’re legally forced to do so.

They will nonchalantly declare that the value of our homes will drop 20% or 30% or 40% in the next year – and then 12 months later when they’re proven spectacularly wrong, you’re not going to get an apology.

Because, let’s be clear, those kinds of sensationalist predictions, which are common in Australian media, do cause considerable grief in the community.

Which brings me to the latest item of serious misinformation that has been inflicted on Australian consumers – that the trend of people leaving the biggest cities and moving to the regions or smaller cities, is over.

Recent articles simply and emphatically have declared that it’s over.

Everyone, apparently, is moving back to the big cities.

Let me tell you, nothing of the sort is happening.

The core population trend which has seen large numbers of people leave the biggest cities and move to smaller cities or to regional areas has been happening for many years.

The official population data shows that Sydney has been losing population to other parts of Australia for the past 10 years and Melbourne has been losing to internal migration for the past five or six years.

The Covid lockdown period made this more visible and gave it extra momentum, but it certainly wasn’t the driving factor.

Fundamentally this big migration of population has been caused by the pursuit of lifestyle and affordability, enabled by technology – which means, the ability to work remotely.

Australians have been relocating in big numbers and the most popular destinations have been Queensland and Western Australia, with Queensland No.1 by a big margin.

Our latest Exodus to Affordable Lifestype report features 10 locations across the country where local economic drivers provide a solid base for affordable homes in attractive locations.

 Grab your copy today The Exodus to Affordable Lifestyle - Feb 23 edition

The situation for tenants across Australia keeps getting worse, because vacancy rates keep falling – and that means rents will keep rising.

The latest report from domain.com.au finds that the national vacancy rate in January was 0.8%, the lowest on record.

The other major source of data on vacancy rate, SQM Research, has a similar figure.

Two of our capital cities, Perth and Adelaide, have vacancy rates of just 0.3% - and there are now only two cities with vacancy rates above 1% - Darwin at 1.3% and Canberra at 1.5%.

Keep in mind that a vacancy rate below 3% is considered a shortage, under 2% is a serious shortage and under 1% is a national crisis.

When your vacancy rate is 0.3%, there’s virtually nothing available to rent and it’s common now to see queues at open houses stretching out the door and down the street.

In circumstances like this, rents inevitably must rise and the cost of living problems for ordinary Australians keep getting worse.

Australian property markets abound with opportunities for real estate investors in 2023.

Consumers can be forgiven for not realising that, given the sensationally negative nature of media coverage of housing markets.

But, right now, the equation for property investors seeking opportunities is particularly strong.

Consider these realities:-

• Many markets are less competitive than before, with buyers having the upper hand in negotiations.
• Vacancies across Australia are the lowest ever recorded.
• Rents and yields are rising, providing good compensation for rising interest rates.
• Most specialist property analysts – including Louis Christopher of SQM Research, Terry Ryder of Hotspotting and Simon Pressley of Propertyology – are forecasting that prices will rise in most locations in 2023.

That equation represents opportunity for investors who buy strategically.

Multi-award-winning buyers’ advocate and best-selling author Miriam Sandkuhler of Property Mavens featured in a webinar on Wednesday 8 February 2023 hosted by Hotspotting founder Terry Ryder.

They outlined the current state of key markets and how to identify the best opportunities for strategic investment in 2023.