A series of recent reports confirm that Australia, generally speaking, has a shortage of real estate for sale at a time of rising demand, which puts pressure on prices. Brisbane is a prime example.

Terry Ryder's Tuesday Wrap 3rd March 2020

Prepare to embark on an exciting journey into the realm of hot property markets with Terry Ryder and Tim Graham! Terry & Tim from Hotspotting, are dedicated to providing the most accurate and unbiased research to help investors make informed decisions on where to buy. The Hotspotting Podcast brings you the latest data, trends, and market statistics, along with in-depth discussions on growth areas and the larger factors impacting Australia's property landscape. 

Terry & Tim regularly feature special guests from around Australia to share their industry insights and expertise to help investors cut through the noise.

Whether you're a seasoned investor or a first-time buyer, this show is a must-listen for anyone looking to build their knowledge and make smarter investment choices. Terry Ryder, with over 35 years of experience as a specialist researcher and writer in residential property, offers expert insights that are completely independent and free from outside influences. Tim Graham has been a buyers agent and mortgage broker for over 13 years along with working in real estate all over the world.

Join us on the Hotspotting Podcast and discover the hottest opportunities in the Australian property market today!

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Want to get into a key market BEFORE prices start to take off? Feel that you may have missed the boat with media favourite Perth? In many ways, the answers to these questions are the essence of smart investing. Most property investors are herd animals, diving into markets when they read that prices have risen 15% or 20% in the past year – or 50% in the past three years.  Buying in such a market means you are likely buying at – or after – the peak of the market. The smart money would have been there 2-3 years ago – and is now focused on places that are early in the growth cycle. That’s why Melbourne makes more sense than Perth for property investors seeking to buy strategically for capital growth. The Melbourne market, in simple terms, is situated where Perth was three years ago, before prices started to rise and rise. The Melbourne market is underpinned by one of the nation’s strongest state economies and boosted by population growth amongst the highest in the country. It hasn’t had the price growth of other cities in the past year but has had a big uplift in buyer activity recently – often a precursor to elevated prices. And vacancies are ultra-low, putting upward pressure on rents.   To find out more about why Melbourne and Regional Victoria should be strongly considered by property investors, join leading national buyers’ agent Kate Hill of Adviseable in this webinar recording hosted by Hotspotting founder Terry Ryder. In this webinar, you will learn …. **Why now is a good time to consider Melbourne and Regional Victoria **Which metrics point to capital growth in Victorian markets **Why recent rental reforms should not deter investors **Which price points are attracting the greatest buyer demand *Why attached dwellings need to be considered *Which Melbourne suburbs and regional centres deserve the most attention To connect with Kate Hill, you can reach here at kate@adviseable.com.au or www.adviseable.com.au  

Webinar Replay - Why Melbourne Makes More Sense Than Perth

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 Arjun Paliwal Having begun the 2010s with lofty ambitions of becoming the top dog at the Commonwealth Bank of Australia, a decision to maximise his “worst case” has led Arjun Paliwal to the man he is today. Almost six years ago, Mr Paliwal decided to pour all his eggs into the InvestorKit basket – and he hasn’t looked back since. Recently, InvestorKit was named the Buyer’s Agency of the Year for the second year in a row at the REB Awards, a proud moment for the business and a ratification that their modus operandi to become “the most trusted data-driven buyer’s agency for successful business owners and professionals looking to scale their business” is coming to fruition. www.investorkit.com.au

Interviews with the 1% - Arjun Paliwal of InvestorKit

Part of the obsession by economists with interest rates as the only thing that matters in the housing market is the notion that the Reserve Bank spends a large amount of time discussing the housing market before deciding what to do about interest rates. As with so many things, economists are wrong about that. One of the most popular definitions of insanity is doing the same thing over and over again, but expecting a different result. My own definition of insanity is the average Australian economist discussing real estate. In essence, those two definitions are essentially the same thing. Economists, especially those working for the big four banks, tend to believe that everything that happens in residential real estate is dictated by trends with interest rates. In their simplistic view of things, rising interest rates means falling prices and falling interest rates means a property boom. They’re utterly wrong about that, because there are always forces more powerful than interest rate movements dictating what happens in real estate – including, right now, the serious imbalance between supply and demand. The other thing economists and other commentators get wrong is their belief that the property market is the over-riding influence in RBA decisions about interest rates. In reality, the property market has little or no impact on RBA decisions. There have been repeated RBA statements over the years telling us that the board does not consider its role to include control or influence the property market. We have seen it in their decision making in the past couple of years, when the prime consideration was trying to bring down the rate of inflation. So now we have a string of mistaken assumptions from economists leading to the forecast that real estate will struggle late this year because the expected cut in interest rates won’t happen. The first mistaken assumption is that the board will decide NOT to cut interest rates later this year because property prices are rising. As I said, they have made it clear they’re fundamentally not the regulators of the real estate market. The second mistaken assumption is that cutting interest rates would cause a property boom - or that keeping interest rates at their current levels will suppress the market. Economists are clearly not students of history. In the late 1980s we had interest rates rising and rising to levels far higher than today and ultimately as high as 17%, if you can believe that – and despite those obscenely high and rising interest rates, property prices kept rising and rising.  It was one of the most spectacular property booms in the nation’s history. In the early years of this century, we had several years of interest rates high and rising, and property prices kept on increasing. And then again last year, 2023 had repeated increases in interest rates and – notwithstanding the doomsday forecasts of economists – house prices rose strongly in most locations, including well above 10% in a number of our capital cities. Meanwhile, the years before Covid had extremely low interest rates but property prices were falling and in 2020, the year of the lockdowns, interest rates went to record lows but there was no property boom (although prices did show moderate growth). When markets boomed in 2021, it was driven by a host of factors, including a high level of government incentives and spending to generate economic recovery. So, in summary – whether or not the Reserve Bank decides to cut interest rates later in the year will depend on their view of inflation and the state of the national economy. Events in the real estate markets will NOT dominate the conversation. If they do decide to cut interest rates, it will NOT generate a property boom.  The big factor will continue to be the shortage of dwellings, regardless of any decisions about interest rates.  

Real Estate Influence on RBA

If you tune into news media regularly, it’s easy to form the view that the prospect of young Australians buying real estate is remote, if not impossible. There are daily headlines telling us that it takes 10 or 15 years to save a deposit, or that most young Australians have given up on home ownership and that young adults are doomed to a life-time of renting. As is so often the case with mainstream media and their love of negative sensation, the reality is quite different. First home buyers are highly active in markets across Australia. But first, let’s look at some of headlines with which we are afflicted every day in Australian news media: “Housing crisis escalates as affordability worsens”. “It’s insane how much you need to save to buy in Queensland” “Melbourne home seekers need to save $250,000-plus to buy a home” “Cost of living crisis holding back first home buyers” And the most spectacular of them all … “The Australian Dream crashes into the affordability brick wall”. One article in the Fairfax media declared: “Aussie home seekers are being made to come up with hundreds of thousands of dollars in upfront funds to buy a home.” How did they come up with such a finding?  By focusing on a 20% deposit (which you don’t need), the median house price (which is ridiculous because FHBs don’t buy at the median price) and always houses, never units which are the dwelling of choice for more and more people and are often half the price of houses in the same suburb. In other words, the objective of those media outlets was not to be informative or helpful – it was simply to create a screaming headline (and the truth is optional). And that article with the headline “The Australian Dream crashes into the affordability brick wall” ? The intro to the article immediately contradicted the headline. It said: Westpac’s Home Ownership Report shows an increase in the share of Australians aspiring to own a home. The survey found 44% of Australians plan to buy a new home in the next five years, up 9 percentage points since July 2023. So what’s really happening out there in first-home buyer land? The latest data from the Australian Bureau of Statistics shows that, far from being priced out of the market, buying activity by first-home buyers has increased recently. The figures on loans to buy a home show that the number of loans to FHBs rose 4.3% in February, compared to January, and were up 13.2% compared to a year earlier. The figures showed that the number of FHBs buying homes was broadly in line with pre-pandemic levels. National Australia Bank senior markets economist Taylor Nugent said first-home buyers were proving resilient. He said higher mortgage rates were not proving much of a hurdle for first-time buyers. In addition to that, research by the Commonwealth Bank finds young Australians are also a dominant force among those buying investment properties. It found that the most active age group among those buying investment properties is the cohort aged between 27 and 42, the one know as Millennials. That group accounted for almost half of investor property purchases in 2023. CBA said investors are getting younger, overall, because of the growing incidence of people getting into the property markets as rentvestors – i.e. people who choose to rent their homes and buy an investment property. So, is home ownership a fading dream for young Australians? According to the data, rather than the media rhetoric, the answer is emphatically NO. The dream is very much alive.  

First Home Buyer Activity

Want to know why housing affordability is so poor in this country?   The answer, in simple terms, is because the cost of building new houses is so high – ridiculously, obscenely high.   The cost of building the typical house in Australia has risen 53% in the past three years – and it now costs close to half a million dollars to build that home.   And that’s just the cost of the house. It doesn’t include the price of the land.   Who’s to blame for this situation?   Primarily, overwhelmingly, it’s government. Politicians and bureaucrats.   They keep making decisions that add to the cost of creating new homes.   Just three years ago, the average cost of building a new house was $320,000.   Now, early in 2024, its $490,000.   Government meddling with the housing industry, and their obsession with using the housing industry as their go-to cash cow when they need to raise money, has caused the average cost of a new house to blow out to almost $500,000.   It’s not the usual suspects that journalists and economists and politicians like to blame for poor housing affordability.   This has got nothing to do with negative gearing, or foreign investors, or mum-and-dad Australian investors, or government grants to first-home buyers pushing up prices.   It’s purely and simply the constant addition to the cost of creating new homes by politicians and bureaucrats.   A couple of years ago, a research study revealed that between 35% and 50% of the cost of a new house-and-land package – depending on where you are in Australia – was taxes, fees and charges by the three levels of government.   Imagine that reality. That every time someone builds a new home in Sydney, half of the cost they’re paying is taxes and fees to government.   Stamp duty, land tax, GST, capital gains tax, application fees, infrastructure charges – and many, many more.    And then there’s the cost of red tape – delays and additional costs caused by bureaucrats.   But that’s just the background. Every year the cost of building a new house grows larger because governments keep changing the rules and regulations – always in ways that add to the costs of construction.   New regulations to make houses safer. New rules to make houses more accessible. New laws to make houses more environmentally friendly. New guidelines to make houses more aesthetically appealing.   Now you might think that those measures are all good things. If houses are (allegedly) safer, more accessible, new energy efficient and better looking, that’s all very positive.   But if you feel that way, you cannot then complain about poor affordability, because you’ve just declared your support for measures that have added massively to the cost of creating new homes for young Australians – thereby causing a further deterioration in housing affordability.   The problem of government taxes, legislation and red tape pushing up the cost of housing has been exacerbated in recent times by the shortages of tradespeople and materials.   Why are there shortages of tradespeople? Mostly it’s because governments around Australia have been trying to spend their way out of the problems of the Covid era with major, new, headline-grabbing infrastructure, which is pulling skilled people out of the home-building industry.   The infrastructure projects that are scheduled to happen in the next five years total $230 billion – at current cost estimates and we can be sure they will blow out to a lot more – and that means the workforce needs to grow 127% to provide the workers and tradesperson required to build all that.   And this will make matters worse for the home building industry.   Master Builders Australia says that the main reasons the cost of building houses has increased so much are ...     Increased building approval times   High taxes, particularly land tax   The shortage of workers   The high cost of materials     Most of the blame for that sits at the feet of government – politicians and bureaucrats.  

Terry Ryder's Tuesday Wrap 3rd March 2020

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