Hotspotting

Investors who own properties in Queensland as well as other states are set to be slugged with massive land tax bills following the introduction of a new tax regime in Queensland.

New legislation was passed on June 24, which allows the Queensland Government to include the value of investment properties owned in other states when working out how much land tax to charge on Queensland properties.

Now, this is outrageous and I’m surprised it’s even legal, but the State Government in Queensland, which has become renowned for its shady dealings, has tried to justify it with political double-speak.

While media obsesses over speculation about property prices, a far bigger issue for residential property is the extraordinary shortage of rental properties.

I have been researching real estate for 40 years and I have never seen rental markets so tight in so many places.

Vacancies have been low for years but they keep falling and now all eight capital cities are well below 2%, with six of them between 0.4% and 0.8%. The national average is below 1%.

“Crisis” is an overused word in media but this truly is a crisis. Desperate individuals and families can’t find a rental home at any price and businesses can’t fill job vacancies because willing workers can’t find a place to live.

This has caused rents to rise in most locations across Australia, particularly in the past 12 months.

Perth is now a nation-leading market, showing strong resistance to downturn pressures as it maintains high levels of sales activity and good price growth.

In contrast to trends in the biggest cities, Perth has delivered strong levels of sales volumes in the latest quarter, despite all the disruption from interest rate rises, high inflation figures and all that ridiculously negative media.

Over the next ten years Australia is going to be THE focus of world attention for anyone with an interest in sport.
Between now and 2032 Australia will be hosting a series of sporting events of global significance – and, while it may not be immediately apparent, this has very major consequences for real estate investment.
Let me explain what I mean.

Firstly, here’s the line-up of global sporting events that will happening in Australia over the next 10 years:-
2023 FIFA Women’s World Cup – Australia and NZ
2026 Commonwealth Games - Regional Victoria
2027 Rugby World Cup (men) – throughout Australia
2029 Rugby World Cup (women) – throughout Australia
2032 Olympic Games – Brisbane and Queensland

Think about that for a moment.
Three world cups, a Commonwealth Games and an Olympic Games.
In the space of ten years.

Now, think about what that means for investment in infrastructure, for tourism, for economic activity, for employment and, as a consequence, for demand for real estate.

I’ve often said to people interested in real estate:
If you want a simple philosophy to guide your investing decisions – one that has been shown to work for investors over time - buy property that lies in the path of progress.
Another way of putting it is: follow the infrastructure trail.
Infrastructure spending is a very powerful factor when it comes to investing in residential property.

Our new Top 10 Infrastructure Hostpots report features locations where existing infrastructure development and future development will drive property growth.

Brisbane and SEQ lead the nation on population growth from internal migration – and there is a major infrastructure spend under way, with big ticket projects totalling around $30 billion under construction.

And there is more to come, because Brisbane and SEQ needs to invest in infrastructure to get ready for the 2032 Olympics.

This means that, while there will be ups and downs along the way, Brisbane will be a growth market for the next 10 years at least.

One of the most common investor questions at the moment is “Should I delay buying because prices might fall?”

This, I have to say, is the reaction of someone who has little knowledge, does little or no research, and simply reacts to media soundbites.

As I’ve often said in the past, the first thing real estate consumers need to do, is …

• tune out all that media white noise,
• avoid that constant source of negativity and misinformation, and
• base your decisions on research and common sense.

It’s really important to think and act independently.

Unfortunately, most prospective investors don’t do a lot of research.

And they react to what they read and hear in mainstream media.

Essentially, they’re herd animals - and they join the stampede, whichever direction it happens to be running in.

While a lot of the discussion about the property market is focused on potential price drops and rising interest rates, the most important information for investors at the moment relates to vacancy rates and rents.

Rising rents mean most investors are well placed to cover any additional costs as a result of higher interest rates, because the rate of rental increases in the past 12 months has been exceptional.

This - coupled with the fact that most borrowers are well ahead on their repayments following years of low interest rates - means most investors will not struggle to service their mortgages.

The rental crisis throughout Australia is receiving a lot of media air time at the moment.

And that means many politicians are determined to be the person or party credited with finding a solution to the problem.

That’s a big concern for me, because every time politicians meddle with property markets with the excuse of providing a solution to things like housing affordability or the rental shortage, they generally make the problem worse.

At long last, we’re seeing the results of the 2021 Census being published by the ABS and there are some surprises on real estate matters.

Most people, I suspect, would have expected home ownership rates in Australia to have fallen over the five years since the previous Census – but they’ve actually improved a little.

In fact, there’s been little change in the rate of home ownership in the past 25 years.

This is perhaps a surprise given the constant steam of articles in mainstream media telling us that home ownership is effectively dead because no one can afford to buy.

The new Census data shows that it’s still the case that two-thirds of Australian households own their homes, either outright or with a mortgage.

While economists and media commentators are going out of their way to spread gloom about property prices, it appears most consumers have managed to tune out all that media white noise.

A colleague of mine describes it as “Doom Fatigue” and I think that encapsulates the public mood at the moment.

Australians are suffering from Doom Fatigue not just about the property market, but after years of the news bulletins being dominated by Covid, natural disasters and war in Europe, they just don’t want to know about it.

People are utterly sick of being bashed with bad news and as a result they are tuning it out.

Many people I know have simply stopped watching the evening news.

And I think this phenomenon of Doom Fatigue has extended to media forecasts on property prices.