Hotspotting

The nationwide rental shortage crisis may appear to be a Covid phenomenon, but it’s something many in the property investment arena saw building for a long time.

Years of constant changes to real estate investment regulations and taxes have pushed many investors out of the market, with the current shortage of properties for tenants the result.

All the core problems confronting the housing market can be blamed on politicians.

Whether it’s the housing affordability issue, the rental shortage or builders going broke in the middle of a construction boom, the short-sighted decisions of politicians are the underlying cause.

Media, economists and banks love to predict disasters for the property market - but it's astounding how consistently they are wrong.
Here are some (incorrect) predictions from the last couple of years.

Right now, many property investors are seeking locations with above average rental yields.

Buying properties that offer a positive cashflow situation is always a good idea, in my view, provided the location has the credentials for long-term growth.

But now more and more investors are looking for superior rental yields – because interest rates are rising, and may rise further.

Finding those positive cashflow scenarios has become harder, not only because borrowing costs are rising, but also because recent strong price growth has pushed down yields.

This may encourage some investors to consider real estate in high-risk locations that offer rental yields of, say, seven or eight percent.

But that’s not the way to go, because these kinds of locations often usually resources-related places and they tend to be boom-bust markets and therefore very risky.

So here’s my idea of the correct mindset to bring to this situation – offering a strategy that can deliver above average capital growth potential, safely, as well as the level of yield needed to cover the costs of ownership.

The idea is this: don’t consider a property only on the initial yield it offers.

Real estate markets across Australia remain busy, with solid price outcomes, with a couple of notable exceptions.

While media headlines have suggested that market decline and falling prices are widespread, our research shows this is not the case.

Our latest quarterly analysis of sales activity shows that most capital cities and most major regional markets continue to deliver busy markets with little evidence of price decline.

Our examination of all the price data that’s available from multiple research sources indicates that there are actually very few markets where prices are falling.

Most market jurisdictions still have rising prices, though not at the same rates of growth as in 2021.

The most important and relevant data for property investors relates to vacancy rates and rental growth – and these are the strongest we have observed.

Now is a time of rare opportunity for investors who have the ability to think and act independently. After several years of highly competitive markets and stellar price growth, the air has cleared for investors seeking strategic opportunities. While prices are still growing in many key markets across Australia, the frenzy has eased in most locations. Investors can buy well without the heat of intense competition. This occurs at a time when vacancies are at record lows and rental increases are compensating for higher interest rates. It’s a healthy alignment of positive factors for smart investors who can tune out the media white noise. The key factor for investors is to choose product and location well. On Wednesday 24 August, Hotspotting founder Terry Ryder spoke with renowned property investment expert Tim Graham from Reventon to discuss how investors can seize the opportunities presented by the new circumstances.

I am increasingly astounded by the lack of awareness by the nation’s politicians of the greatest issue in the housing market today – the rental shortage crisis.

AND the way state and federal politicians are making decisions almost daily which will make the situation even worse.

At the recent federal election, there was no discussion about the dire shortage of places for renters to live and none of the major parties put forward any policies to deal with it.

I think it’s safe to assume that this is because they were unaware that there’s even a problem to be dealt with.

The rental shortage has been building for years and now, somewhat belatedly, media has realised there’s a story here.

So now there are major articles every day with strident headlines describing desperate people sleeping in cars and living in tents because they can’t find anywhere to live – right across Australia.

Yet, despite the appearance of these startling stories day after day, politicians at all levels of government are apparently still unaware there’s a problem.

Rumours of the death of the Melbourne market have been greatly exaggerated.

While media is full of feverish headlines and soundbites about falling demand and collapsing prices, our research proves it simply isn’t so.

The Melbourne market is renowned for its resilience in tough times and our latest quarterly survey has confirmed it, with busy sales activity and solid price outcomes – particularly in the cheaper markets.

Our Spring 2022 quarterly survey has found 193 suburbs with persistently good sales activity – only 1 less than in our Winter Survey 3 months ago. This is despite the disruption of rising interest rates, cost-of-living pressures and persistently negative media.

That so many Melbourne locations have been able to maintain forward momentum, despite all the negative forces, is testimony to the strength of the city, which was named as the nation’s No.1 growth economy in the July 2022 edition of the State of the States report by CommSec.

Whether it’s the cheaper outer ring areas, the popular middle Melbourne suburbs or the inner-city apartment precincts, there’s still plenty of life in the Melbourne property market, so grab your copy of the new edition of Top 5 Melbourne Hotspots, which feature the best prospects in this consistent market.

Credible analysts, increasingly, are making forecasts for Australian property prices which contradict the sensationalist and alarmist predictions we have seen from media in recent months.

More and more sensible commentators are suggesting that any post-boom correction in residential property prices will be moderate and that many locations will continue to deliver solid growth.

They are also commenting that the general media theme that rising interest rates cause property markets to collapse is unreasonable and not based on historical precedents.

Regional Victoria is “the market that refuses to give up”.

Regional Victoria has been a national leader of the Exodus to Affordable Lifestyle trend and continues to draw residents out of Melbourne.

The key regional cities of Victoria have been notable growth markets for the past 4-5 years – but, amid all the disruption that’s currently afflicting real estate markets, they keep on keeping on.

The strong sales activity seen in the March Quarter continued in the June Quarter, despite rising interest rates and cost-of-living pressures.

Overall, activity in key centres across Regional Victoria remains busy and prices are still rising in most of these markets.

Whatever mainstream media says about markets crashing in various parts of Australia, it’s certainly NOT happening in Regional Victoria.

Our new Top 5 Victoria Regional Hotspots report is essential reading for anyone planning their investment decisions, as it provides research-based evidence of the markets we expect to do well through 2022 and beyond.