It’s been 15 months since Prime Minister Anthony Albanese made his big announcement about fixing the housing shortage – but there has been, as yet, no progress in lifting rental vacancies and suppressing rental growth.   The press conference making the announcement that the Federal Government would build 1.2 million new homes in five years was held in August 2023 – but more than a year later it’s clear that little progress has been made and that rental vacancies are not improving.   The latest figures on vacancy rates from SQM Research shows the national vacancy rate at 1.2% In October, unchanged from September and only a fraction higher than a year ago.   Five of the eight state and territory capital cities actually recorded a month-on-month reduction in their vacancy rates, while two others recorded no change.   The only capital city to have an increase in vacancies was Darwin.   Overall, the number of properties available for rental has dropped from almost 38,000 in September to 36,500 in October.   To put that in context, in December 2016 – the last time Australia had a vacancy rate close to 3% - there were 90,000 homes available for rent across the nation.   And Australia has added about three million people to its population since 2016.   Compared with a year ago, when the Federal Government was spruiking its big fix to the shortage of homes, five of the eight capital cities still have vacancy rates at similar or the same levels – and one, Hobart, is significantly lower than 12 months ago.   The highest vacancy rate among the eight capital cities is Canberra at 1.7% - the same as it was a year ago and significantly lower than the benchmark 3% which is considered in the industry to represent a balanced rental market with stable rents.   Now, a year is a long enough time for a government to move the dial on an issue like the rental shortage. Australia could improve this situation almost overnight by implementing measures to encourage and incentivise Australians to become landlords.   The big problem, which has been building now for many years, is that the nation has a chronic shortage of people willing to take on the task of being landlords – buying an investment property and making it available for others to live in.   Government doesn’t perform this role and neither does big business. Over 90% of the homes that people rent in Australia are provided by mum-and-dad investors – but fewer and fewer people are willing to do it, at a time when the costs of doing so are unattractively high and the rules and regulations keep changing to the distinct disadvantage of the owners.   Governments caused this rental shortage and they keep making it worse. So rental vacancies are unlikely to improve in the foreseeable future.   And while that remains the case, there will continue to be upward pressure on rents and an absence of choice for people who need to rent or choose to rent.   Four years ago, the median weekly rent for a house in Australia was around $440 – today it’s over $700.  

There are multiple reasons why Australia has a housing shortage and why the numbers of new dwellings needed are simply not being built. This is something I have spoken about regularly in the past and will continue to do so, as it’s the core issue creating problems for real estate consumers of all kinds – home buyers, investor buyers and tenants. Here are the latest events and announcements which help to explain why we have a housing shortage with rising prices and rising rents, problems which are not going to be fixed in the foreseeable future … ITEM 1 – BUREAUCATIC DELAYS: Sydney councils are sitting on backlog of almost 8,500 unresolved development applications and requests for development certificates, according to NSW government data. There are over 5,000 unresolved development applications across the Greater Sydney area, plus 3,300 active “complying development certificates”. Five councils each have more than 300 local development applications that are waiting to be finalised. Data from the Department of Planning Housing and Infrastructure lists the Inner West Council as the worst offender, with 456 “active” DAs waiting for a determination. The Northern Beaches, Hills Shire and Cumberland Councils also have major backlogs. Thousands more “complying development certificates” are also adding to the backlog, despite being designed to give faster approvals to developments that meet certain requirements. Some councils are taking more than a year to approve homes. And some developers are waiting up to a decade for projects to be approved. In my view, one of the core issues is that many councils have a NIMBY attitude to development, especially high-density residential. They simply don’t want developments to be built and do everything they can to frustrate builders. ITEM 2 – NOT FINANCIALLY VIABLE: In Perth, the rate of apartment completions has dropped to its lowest levels since records began in the 1980s. A new Property Council report says that, to meet the housing targets set by the National Housing Accord, WA would need to be delivering five times the number of apartments per year that it currently is. The Sky High report says there are more than 10,000 apartments approved for WA but effectively on hold and unable to be constructed. The major issue is that projects are just not financially viable – because the cost of delivering an apartment is generally higher than the market is willing to pay, so projects simply don’t stack up. Only luxury apartments are economically viable projects. The report blames climbing construction costs - driven by labour shortages and competition for labour from government and mining sectors. The report says: “Developers are reporting that construction cost estimates are now almost double the cost of similar developments five years ago.”  The Property Council expects that costs will climb even higher as the new national construction code and bargaining agreements imposed by government take effect. This is problem not only in Perth but right across Australia. Developers are scrapping unit projects because the costs are so high, making them financially unviable. The Australian Construction Industry Forum says it’s a worrying trend for a country that needs more, denser homes – not only apartment towers but medium-rise and townhouse developments in existing suburbs – to tackle the chronic undersupply of housing and to ensure longer-term affordability. The forum’s Construction Forecasting Council chair and chief economist Nerida Conisbee says: “It’s very, very expensive to build apartments. Many projects aren’t going ahead.” ITEM 3 – WORKER SHORTAGES: A recent report reveals that Australia needs 130,000 additional workers to combat labour shortages in the construction sector. This has prompted calls for rapid reforms from both federal and state governments to attract and retain skilled labour. The report says the nation is on track, in 2024, for the worst year in new home builds in over a decade, with an 9 per cent decline in new building starts, totalling just 158,000 when it needs to be 240,000 per year to meet the Federal Government’s fanciful target of 1.2 million new homes in five years. Construction starts for detached houses have dropped by 10 per cent, while higher-density projects have declined by 6 per cent. If this pace continues, Australia could see fewer than 800,000 new home starts over the five years, leading to a shortfall of over 400,000 homes compared to the National Housing Accord target. The decline in apprenticeship numbers further compounds this crisis, with completions down 8 per cent and commencements down 12 per cent in the past year.  ITEM 4 – POLITICAL POLICIES: The Housing Industry Association says a home building recovery is possible because buyer demand is rising, but state government housing policies risk stalling the revival. HIA Senior Economist, Matt King, says demand for new homes nationally is accelerating - largely due to high population growth, low unemployment, stable incomes and the absence of interest rate rises for the past year. King says activity generally is picking up, but there are big differences across capital city and regional markets. Sydney remains an outlier and there is still no indication of a near-term rebound in residential building in the big city. King says: “New home building in the Sydney basin remains exceptionally low, primarily due to high land prices and excessive housing taxes and infrastructure charges.” Australia-wide, the HIA says the detached home building sector looks promising, but the unit sector remains constrained and is unlikely to experience recovery before mid-2025.  King says: “The sector continues to be dampened by skilled labour shortages, business credit constraints and the aftermath of significant building material cost escalation.  “The extent of the recovery in new home building will be determined by the ability of governments to ease the barriers to home building. “Recent state government plans to increased surcharges on foreign investors and introduce taxes on short-term rental accommodation are unhelpful at a time when stability is needed to achieve the target of 1.2 million homes.” King says the rate of home building is being slowed down by government failure to implement policies such as expedited land releases, concessions on property taxation, and accelerated development approval time frames. ITEM 5 – HIGH LAND COSTS:  The rapidly prising cost of home sites is one of the biggest barriers to easing the housing shortage. New figures for South East Queensland indicate that the cost of residential home sites has jumped by as much as $120,000 in a year – up 21 per cent in one LGA where it now costs as much for a block of land as the median home did just two years ago. This is the City of Brisbane LGA where land prices rose 8.7 per cent in the September quarter alone, pushing the median price of a block of land to $685,000 – which is $3,000 more than what an established home cost in this area in June 2022. The second biggest annual surge in land prices occurred in the City of Ipswich where the median block rose 15 er cent or by $48,000 to hit $360,000, with the third fastest pace set by Moreton Bay, where prices rose by 10 percent to $415,000. The cheapest blocks of land in South East Queensland are in Logan City in Brisbane’s south, where a third of SEQ land sales are now occurring – with the median price at $350,000 after a rise of almost 10 percent across the year.  The Gold Coast had the second highest SEQ land price at $619,000, after an 8 percent rise in the past year. So, you can imagine what a new house on a block of land costs, when the land alone costs well over $600,000 – as it does in the City of Brisbane and on the Gold Coast. Why does it cost so much? Primarily because of bureaucratic delays, governments taxes fees and charges, and high interest rates – all problems created by our elected representatives.  

If I asked you to nominate the market which had recorded the best long-term capital growth in Australia, what would your answer be?   Sydney, the capital city with the nation’s highest property prices?   Perth, which has had a booming property market lately and has led the nation on price growth for past couple of years?   Brisbane, which always attracts strong demand from buyers of all sorts?   Or perhaps Regional Queensland, which benefits from internal migrants moving from others parts of Australia and from investors seeking affordability and strong yields?   The correct answer is none of the above.   The market jurisdiction which has led the nation on long-term capital growth is: Regional Tasmania.   This is the outcome of research conducted by the Property Investment Professionals of Australia (PIPA), which analysed Australian Bureau of Statistics’ data on established median dwelling values over 20 years - from June 2004 to June 2024.   The top location recorded growth of 233% while the worst grew 100% over the two-decade period.    In comparison, over the past 20 years, the stock market (S&P/ASX 200) increased by 120%, according to investing.com.   In general terms, the best capital growth has been smaller capital cities or more affordable regions.    The top result was “the Rest of Tasmania”, which means Tasmania outside of the capital city Hobart or Regional Tasmania - where its established median house price rose from $169,000 20 years ago to $449,000 in mid-2024.    The best capital city performers were also some of our nation’s most affordable throughout the period with Adelaide, Hobart, and Brisbane taking out the top three city rankings.    PIPA comments that property markets are not linear – rather, price growth occurs at varying points over time. Hobart, for example, has experienced a softening of prices over the past few years, but its house price have almost tripled since 2004 – up 193% in 20 years.   Adelaide and Brisbane have both had very strong markets in the past two years but both had long periods of flat-lining prices throughout the past two decades.   It reflects the reality that real estate consumers get the best results through long-term ownership and PIPA Chair Nicola McDougall says property owners should always adopt a long-term mindset.   But PIPA research indicates many investors don’t follow that philosophy.   PIPA’s 2024 Annual Investor Sentiment Survey found that 61% of investors who sold in the past year had a holding period of less than 10 years – and 17% of those investors who sold indicated they had owned the property for less than three years.    So the rankings from the PIPA research on capital growth over the past 20 years are: 1 Regional Tasmania 2 Adelaide 3 Hobart 4 Brisbane 5 Regional Victoria 6 Perth   Sydney ranked seventh and Melbourne 11th, once again disproving one of the real estate’s greatest myths, that you get the best capital growth in the biggest cities – and that prime out-performs affordable.   And the worst performers were Darwin and “the Rest of Northern Territory” – but even the remote markets of the NT achieved a doubling of property values over 20 years.  

The Property Playbook is a dynamic real estate show that empowers investors and professionals with the insights and strategies needed to achieve strong returns in the Australian property market. Hosted by Tim Graham & Terry Ryder from Hotspotting. In this episode, Tim is joined by Hotspotting Founder and Director Terry Ryder. As an experienced real estate expert, Terry Ryder shares insights on identifying prime real estate investment locations in Australia. He introduces the Price Predictor Index, a model that predicts short-term property growth based on sales volumes. Ryder emphasises the significance of monitoring buyer activity, infrastructure investment, and market size when identifying promising real estate markets. https://tickernews.co/shows/the-property-playbook/

Welcome to a special episode of Hotspotting’s pre-recorded interview series, Interviews with the 1%, where we dive into the strategies and journeys of Australia’s top investors—the elite 0.87% who own five or more properties. Hosted by Tim Graham, this series brings you invaluable insights from seasoned investors who have achieved what many aspire to. In today’s episode, we sit down with Lisa Chapman—a property entrepreneur, investor, and co-creator of the luxury retreat, Eden Yarra Valley. Lisa shares her journey from a high-powered corporate career to becoming a full-time property entrepreneur, carving a unique niche in the accommodation and real estate sectors. What You'll Learn in This Episode: The Mindset of the Top 1%: Discover what separates successful investors from the rest, as Lisa reveals her strategies and lessons learned from owning multiple properties. Lisa’s Property Journey: From buying her first house at 22 to establishing diverse real estate ventures across the Yarra Valley and the Mornington Peninsula. Creating Eden Yarra Valley: Hear the inspiring story of transforming a run-down property into a high-end retreat that caters to milestone events, weddings, and corporate retreats. Navigating Career Transitions: Insights into Lisa’s pivot from a high-stress corporate career in PR and real estate marketing to her fulfilling role as a property entrepreneur. Tips for Aspiring Investors: Practical advice for those looking to build their property portfolio, including lessons from Lisa’s successes and challenges. About Lisa Chapman: Lisa Chapman’s remarkable career spans television, marketing, public relations, and real estate. She managed national and global campaigns, including the iconic launch of Melbourne’s Eureka Tower and Skydeck. After decades of corporate success, Lisa made a bold shift during the COVID-19 pandemic to focus on her passion for real estate and the Experience Economy. Today, Lisa is the proud co-creator of Eden Yarra Valley, a luxury retreat offering bespoke accommodation for up to 30 guests. From weddings to wellness retreats, Lisa’s innovative approach to property investment highlights the value of creating meaningful experiences for clients. Key Takeaways from Lisa’s Story: The Power of Vision: Lisa’s ability to see potential in underutilized properties has been central to her success. The Value of Experience: Transitioning from corporate PR to property entrepreneurship, Lisa leveraged her marketing expertise to create a standout brand. Lessons from Investing: Lisa shares actionable advice for both new and seasoned investors, including how to identify opportunities and manage challenges. Notable Quotes: “We are living in the Experience Economy. Today, people are looking to invest in meaningful moments, not just material assets.” “Real estate is about creating value—whether it’s a luxury retreat or an investment property. The potential is there if you’re willing to look.” Connect with Lisa Chapman: Website: edenyarravalley.com.au Email: [email protected] Subscribe to Hotspotting’s Podcast: Stay tuned for more episodes of Interviews with the 1%, where we uncover the stories behind Australia’s most successful property investors. Don’t forget to like, share, and subscribe on your favorite podcast platform!

Host: Terry Ryder, Founder of Hotspotting.com.au Guest: Steve Palise, Commercial Property Expert and Founder of Palise Property In this insightful webinar, Terry Ryder sits down with Steve Palise to explore the exciting world of commercial real estate. With decades of combined experience, Terry and Steve unpack key trends, strategies, and opportunities in non-residential property investment. Whether you’re a seasoned investor or just starting to consider commercial property, this session is packed with actionable insights. Topics Covered: Why Investors Are Turning to Commercial Real Estate: Higher yields, flexibility, and unique financing options make commercial property an attractive choice. Types of Commercial Properties: Industrial, retail, and office spaces—what to look for and how to assess opportunities. Key Market Trends: Vacancy rates, regional hotspots, and the impact of infrastructure projects on property value. Risk Management: The importance of due diligence, understanding leases, and analyzing tenant dynamics. Investment Fundamentals: How residential market indicators can inform commercial property decisions. Key Takeaways: Superior Yields: Learn how net yields in commercial real estate often surpass those in residential investments. Market Nuances: Discover why regions like Brisbane and Perth offer exceptional opportunities for commercial investors. Educational Resources: Steve shares free tools, checklists, and courses to help investors navigate the complexities of commercial property. 💡 Thinking about investing in commercial property? This webinar will help you understand the landscape and take your first steps toward creating a diversified, high-performing portfolio. 🎧 Listen to the Podcast: Stay updated on all things real estate by subscribing to our podcast on your favorite platform. 🔗 Connect with Us: Visit Hotspotting.com.au for more resources. Visit PaliseProperty.com for more information on Steve's business. You can also access Steve's Commercial Property Course by visiting: https://www.commercialpropertyinstitute.com.au/ Use the code word Hotspotting to receive a 100% discount!

There are many reasons Australia has a dwelling shortage and affordability problems – including the increased time it takes to build a new home. In recent years, it typically took around nine months on average to build a house in Australia. Today it takes 13 months. It’s worse for businesses which are constructing apartment complexes. Recent analysis from Master Builders Australia has revealed that building times for detached homes and apartments have almost doubled – with a consequent impact on costs. Master Builders says: “It shouldn’t take this long to build a home”. These findings, obtained from recent analysis of Australian Bureau of Statistics (ABS) data, show that it took an average of 13 months to build a detached house in FY2024, marking a 40 per cent increase on the average compared to a decade ago. Master Builders noted that construction times had lengthened even further for apartment buildings, with the average of 33 months from approval to completion in FY2024, representing an 80 per cent increase on the average of 18.5 months observed in FY2011. That warrants repeating: it previously took a year and a half to get the average apartment building completed, but now it takes almost three years. And that’s the national average situation: it’s considerably worse in some states. You don’t need to be a financial genius to understand what that does to the costs of building new homes in Australia. CEO of Master Builders Australia, Denita Wawn, says these extended construction time frames are hindering the industry’s ability to address housing demand and confront the housing crisis. She says: “There are a range of contributing factors including labour shortages, declining productivity, union pattern agreements, supply chain disruptions, complex regulatory requirements, occupational certificate backlogs and critical infrastructure delays.”  Wawn points out that, with the advancements which have occurred in technology and construction methods in recent years, “we should be building homes faster, not slower”. Master Builders called for action to be taken to address the bottlenecks and inefficiencies around construction processes. They suggest streamlining government approval processes, encouraging adoption of digital solutions, introducing incentives to grow the workforce through domestic and international means, and strengthening the domestic supply chain. Master Builders chief economist Shane Garrett says that the latest ABS data on home completions indicate the country is on track to fall well short of the National Housing Accord target of 1.2 million homes by 2029 – indeed, by “over 400,000 homes”.  

It’s long been the case that the two most populous states, New South Wales and Victoria, have attracted the highest levels of property investment – just by sheer weight of numbers. But Victoria has lost its spot among the big two of property investment and is now being overtaken by Queensland. Meanwhile, Queensland now leads the nation is overall real estate transactions, including purchases by both home-buyers and investors. This is despite Victoria having a population of 7 million, versus 5.5 million in Queensland. It provides further evidence that investors are deserting Victoria because of the raft of anti-landlord measures from the State Government, with more still to come. And that Queensland is where buyers are all kinds are heading. Analysis of ABS figures shows that, a year ago, 26 per cent of investor loans were for Victoria properties and around 22 per cent for Queensland. More recently, the balance has shifted with Victoria dropping to 23 per cent of investor loans and Queensland continuing to rise. Money.com.au says investors are abandoning Victoria for several reasons, including Victoria’s additional taxes on investors, and are flocking to Queensland. Home Loans expert Mansour Soltani says: “Queensland is emerging as the new promised land. It has everything property investors look for including a strong local economy, population growth, expanding regional markets and ongoing infrastructure projects.” Queensland is leading the nation with a 36 per cent year-on-year increase in investor loans, compared with the national average of 21 per cent.  Regional markets such as Townsville, Bundaberg, Rockhampton and Gladstone are offering low entry costs and above-average rental yields. Soltani also says: “Queensland is not only leading investor activity — owner-occupied loans in the state grew by 12 per cent year-on-year, while no other market grew by more than 6 per cent, and New South Wales saw no growth.” Realestate.com.au reports that nearly $40 billion was spent on residential property in Queensland in the past quarter, with the state recording the highest number of home sales in the country in the last three months. Brisbane’s median dwelling price has also extended its lead over Melbourne’s — climbing to $885,000 in October, while Melbourne sits at $780,000, according to CoreLogic. New figures from digital settlements platform, PEXA, show over 48,000 home sales were finalised across Queensland in the September quarter, with home buyers spending $38 billion — 27 per cent more than the same period a year ago. The postcodes with the highest number of home sales in the three months were found in Toowoomba, the Gold Coast and Mackay. Homebuyers also moved to regional coastal areas such as Bargara near Bundaberg and Urangan in the Hervey Bay region, as well as new housing development areas in Logan City and Ipswich City on the fringes of Greater Brisbane.  

Whenever I’m asked for my rules for successful investing, I usually begin my response with this: Rule One – stop reading newspapers. Expressed in a more 21st Century context, stop treating media soundbites as research. People who base their investment decisions on the white noise in news media are running the risk of making very bad moves in the market. My observation of the content of news media coverage of residential real estate is that there is far more misinformation than real, accurate, reliable information. In modern media it’s all about clickbait and I find repeatedly that the headline presented to induce you to CLICK is highly misleading – and sometimes an outright lie. I could provide dozens of examples from this week alone, but here’s just one classic example. The headline above an article published on the news.com.au network, the nation’s biggest news organisation, proclaimed: “Worst is over: where rents are plummeting” This was followed by the following opening statement: “The worst of the rental crisis appears over across much of Australia, with rents plummeting in these areas. But it’s not all good news.” Now the headline in this case is more than a lazy piece of sensationalism – because, not only is it untrue to claim that “rents are plummeting” but the content of the article does not support the claim in the headline. You may have observed that, in the surreal world of journalists, nothing falls or decreases or drops – it collapses, it nosedives, it falls off a cliff – and, yes, it plummets. Even when the decline is a few percent, barely a blip, it will be declared to be plummeting. So having made the statement that rents were plummeting and that the worst of the rental shortage crisis was over, the New Limited article utterly failed to deliver on this very big statement. If it was true, it would be one of the stories of the year. But, of course, it wasn’t true. According to the article, Queensland’s asking rents “have surged again, increasing across 252 Queensland suburbs by up to 15 per cent since June”. I’ve checked my dictionary definition of “plummeting” and it certainly doesn’t apply to the Queensland situation. Next, Victoria. According to this article, there are more than 200 suburbs where rents are now at least $100 a week more expensive for units than in 2021.  It said: “Well-connected areas like Ashburton, Parkville, Aspendale, Caulfield South, Glen Waverley and Carlton have posted some of the biggest rises in weekly unit rents across the past three years, all of them up more than 40 per cent, according to new PropTrack data.” No sign of anything plummeting in Victoria – where, incidentally, many investors have sold up and got out of the state because of draconian anti-landlord measures by the state government. So we can expect rents to keep rising in Melbourne. In Adelaide, rents have fallen a little in the latest quarter in 17% of suburbs examined by PropTrack, but there’s no sign of plummeting in the other 83% of suburbs.  Adelaide, in fact, has had extraordinary growth in rentals in the past year and, with the vacancy rate still hovering around 0.6%, there’s no real basis for declaring that “the worst is over”. In Perth, the vacancy rate remains well under 1% and there is no real prospect of rent relief any time soon. So, looking through the entire article, the only evidence presented to go even close to supporting the noise in the headline is in Sydney. According to this shoddy piece of “journalism”, Sydney has entered a correction phase. PropTrack attributes the market slowdown to more rental homes becoming available and tenant demand dropping as more renters moved to share houses or back in with their parents to save money. Migration has also waned in recent months. PropTrack says: “Demand and supply are working together to see a stabilisation in rental market conditions.” But no evidence was presented in the article to support the notion that Sydney rents are nosediving. So, in summary, only in Sydney is there evidence that “the worst is over” and there is nothing at all in this work of fiction is justify the claim that rents are plummeting – anywhere. So, what is a realistic overview of the situation with the rental shortage crisis. Nationally, the vacancy rate continues around 1% or slightly above 1%, depending on whose figures you believe. None of the eight capital cities has a vacancy rate anywhere near 3%, which is the benchmark for a stable rental market with steady rents. There are no government measures in play which will move the dial on this in the foreseeable future – except decisions which are likely to make it worse, rather than better. In some locations, however, I do expect rental increases to moderate, because a ceiling has been reached in terms of the market’s ability to pay. Amid a cost-of-living crisis, tenants cannot keep paying higher and higher rents, regardless of how many people they jam into a three-bedroom house or small apartment. But rents plummeting? We’re unlikely to see that anywhere, not while vacancies are as low as they are.  

At Hotspotting we believe real estate markets are local in nature and are subject to the strength or weakness of the local economy. While economists cling to their kindergarten theory that markets are essentially driven by interest rates, the stark differences in local markets across Australia suggest that there is something more powerful in play. If it were true that high interest rates mean prices will fall, then everywhere in Australian would have falling property prices in 2024, which is what major bank economists and others like them predicted at the start of the year. The reality that Perth, Brisbane, Adelaide and many key regional centres have had booming property prices indicates that (a) the economists are wrong in their simplistic theory; and (b) there are larger forces of influence, which are local in nature. And the record shows that the local economy is the key factor, over-riding any influence from interest rates, which are the same everywhere in Australia. For that reason, I always take note the quarterly editions of The State of the States report published by CommSec, which is part of Commonwealth Bank. For many years I’ve detected a correlation between the findings of that report and outcomes with property prices in our capital cities and our regional markets. The report uses eight different metrics, including construction work, population growth, retail spending, housing finance and employment data, to rank the eight state and territory economies. The latest quarterly edition of State of the States ranks the states and territories like this: Western Australia 1, South Australia 2, Queensland 3. Not coincidentally, the leading cities with booming property prices are, in order, Perth 1, Adelaide 2 and Brisbane 3. In addition to that, the leading regional markets are Western Australia, South Australia and Queensland. The report finds that the greatest strength for WA is population growth while the greatest weakness is dwelling starts – and those two factors working together would tend to put upward pressure on property prices (and rents). South Australia’s greatest strength is economic growth while in Queensland it’s housing finance. The jurisdictions with the weakest economies – the Northern Territory, the ACT and New South Wales – are also the places where property prices have been weak recently. So if you want a simple method of detecting where dwelling prices are most likely to be strong, keep track of the quarterly editions of the State of the States report.  

Household wealth in Australia keeps rising and it’s residential property that’s responsible. The latest figures from the ABS show that overall household wealth has increased for the seventh consecutive quarter. It rose a further 1.5 per cent in the June quarter to a record $16.5 trillion, driven primarily by property assets.  Total household wealth is now 9.3 per cent higher than it was a year ago, driven by residential land and dwellings. Of the 1.5 per cent rise in the June quarter, 1.3 percentage points was attributed to residential property – our homes and investment properties. Dr Mish Tan, head of finance statistics at the ABS, said: “House prices have continued to rise across most states and territories. “This largely reflects ongoing housing supply constraints and an uptick in investor activity over the quarter.” Residential real estate assets now account for approximately two-thirds of total household wealth. Property assets reached an unprecedented level of $11.22 trillion as of 30 June, making up around 68 per cent of household wealth, driven by rising property prices. Households also hold $1.72 trillion in cash and deposits or 10.4 per cent of their total net worth, alongside $3.94 trillion in superannuation assets.  

Everyone seeking real estate in desirable locations has the same complaint: the lack of stock. Home buyers, investors, buyers’ agents and selling agents are all being frustrated by the shortage of listings of properties for sale – particularly quality options. Leading national buyers’ agency Adviseable says a partial solution for buyers is to consider building from scratch rather than buying an established property. The tactic has many advantages – and one or two problems as well. Alex Dutt of Adviseable says deciding whether to buy an established property or to go down the new construction route is not always a simple choice. It can be difficult to cut through the noise and find a truly unbiased insight into the topic to determine which strategy is the right one for you. Adviseable has put together an honest, warts-and-all exploration of the pros & cons of buying an established investment property versus going through the process of building a new one. And on Wednesday 30th October, Alex Dutt joined Hotspotting founder Terry Ryder to discuss the issues involved in making that choice. He points out that Adviseable, as a buyers’ agency, has no vested interest in which choice an individual buyer makes. So it can present the advantages and disadvantages without fear or favour.   www.adviseable.com.au

In my experience, most people who have a loud view about scrapping negative gearing are people who can’t explain what it is, how it works, why it’s bad and how ending it would solve all the problems in the housing industry. Mostly, what’s in play with this issue is THE POLITICS OF ENVY – that nagging feeling some people have, that others are doing better than they are, or are receiving benefits that they are not, and therefore need to be squashed. As a famous Indian guru once observed, some people try to be tall by cutting off the heads of others. Contrast that with the views that are expressed when they come from people with the expertise and experience to understand what negative gearing is, how it works and what the consequences would be if it was removed. A recent poll of such people found that the disadvantages would outweigh the advantages. Before delving into the comments of experts who have been interviewed by news media about this recently, let me remind everyone that Australia DID end negative gearing in the 1980s and within two years the same Federal Labor Government that scrapped it, did a major backflip and reinstated it. Why? Because it caused a serious shortage of rental properties and higher rents. And it didn’t bring down property prices or improve housing affordability. Let me also remind you that more recently New Zealand put an end of negative gearing tax benefits and right now that nation’s government is reinstating it – because, as happened in Australia in the 1980s, the upshot was a rental shortage and higher rents. In the light of those precedents, you have to wonder why we’re having this debate at all. Now, returning to a recent survey of so-called experts polled by the Australian Financial Review – the majority view, arising from that survey, was that the consequences of changing tax arrangements for property investment are likely to include higher rents. Why? Because investors would exit the housing market, causing a further drop in supply of rental homes at a time when Australia has the lowest vacancy rates ever recorded. Analysts polled in the quarterly Australian Financial Review property survey, overall, painted a “BE CAREFUL WHAT YOU WISH FOR” scenario amid a national debate over the merits of changes to negative gearing and capital gains tax – which is usually described by media, inaccurately and unfairly, as a CONCESSION. Those polls said any benefit to first home buyers from any price falls – which are hypothetical and not based on any precedent or research - as investors exit the market would be modest, potentially short-term and effectively traded off against a consequent squeeze in supply. Here’s one prediction from a respondent to the survey: He says: “By lowering the after-tax return to investors, any move to wind back the negative gearing benefit and increase capital gains tax would lead to a fall in investor demand for housing and a short-term fall in prices, say of 3-4 per cent.”  However, those comments from Australia’s worst forecaster of residential property outcomes, AMP chief economist Shane Oliver – so the forecast that property prices would fall is somewhat dubious. That certainly didn’t happen in Australia in the 1980s or in New Zealand after they, more recently, ended negative gearing. In any case, Oliver goes on to say: “However, this (slight fall in prices) is likely to be short-lived as less investor participation in the property market would ultimately lead to a lower supply of new homes to the property market, higher rents and then a blowback to higher prices. “It will do nothing to fix the basic problem which is a chronic undersupply of housing relative to population-driven demand.” That much he got right. Proptrack’s executive manager for economic research, Cameron Kusher, said the removal of negative gearing and increasing capital gains tax might marginally reduce house prices, but consequent discouragement to investment would reduce supply. He said” “It’s important to look at the taxation system holistically rather than in a vacuum, especially whilst the rental market remains challenged.” In other words, there would be more disadvantages than advantages. Barrenjoey’s chief economist Jo Masters warned of the “unintended consequences” of modifying the current settings. She said: “Negative gearing and capital gains tax reform alone are not a silver bullet and need to be debated both in the context of broad tax reform, and the other levers available to the housing sector, including supply.” Nicola Powell, Domain’s chief of research and economics, said that it was “a common misconception” that the negative gearing and CGT provisions were “primarily enjoyed” by wealthy, older Australians.  Powell said most investors own just one property, and a larger share of them are under 50. She said: “If negative gearing were removed or scaled back, younger, more financially vulnerable investors – especially those with just a single property – would be the first to feel the impact, potentially leading them to sell. Meanwhile, wealthier investors, who are more likely to be positively geared, have greater financial flexibility and would be less affected.” Like other respondents, Jarden analyst Lou Pirenc says any benefit from the departure of some investors from the market it would come at a cost. He said: “Longer term, growth to new housing supply could be further weakened with less incentives for investors to enter the market, especially as the cost of owning an investment property currently remains unattractive. “This,” he said, “could potentially see house prices RISE longer term as the imbalance between demand and supply exacerbates.” Indeed. So the consensus among those commentators is that removing negative gearing tax benefits and increasing capital gains tax would not provide any long-term improvement in housing affordability but would reduce the supply of housing, particularly rental homes, and PUT FURTHER UPWARD PRESSURE ON RENTS. But try telling that to the Greens, whose draconian anti-real estate policies were a primary reason they were the big losers in the Queensland state election at the weekend.  

Politicians and journalists love to scapegoat and demonise, particularly with issues impacting housing markets – with property investors always a popular target. Australia’s love of scapegoating is one of the reasons the nation seldom resolves any of the key issues it faces. Politicians hold press conferences, they stage inquiries, they bring on royal commissions, they make announcements – but the recurring theme is looking for someone to blame and to vilify – preferably someone other than themselves. In real estate, investors and related issues like negative gearing are blamed for all the problems afflicting the housing industry – including poor affordability and rising rents. But, according to analysis by the Reserve Bank, property investors have copped the brunt of rising interest rates and haven’t passed on their impact to tenants in the form of higher rents – or, not much. New Reserve Bank research debunks the idea that so-called greedy landlords simply pass on higher mortgage costs to their tenants via rent increases. According to the RBA analysis, after analysing years of investor tax returns, for every $1 increase in home loan interest repayments, property investors have raised rents by just 1¢. The RBA economists who wrote the report said: “To put this effect in context, the median monthly interest payment for leveraged investors increased by around $850 between April 2022 and January 2024. “Our estimate suggests that this $850 increase in interest costs would have raised rents by less than $10 per month, or just over $2 per week.” The research, released in the RBA’s quarterly bulletin, is an attempt by the central bank to refute the commonly held perception that landlords pass simply higher interest rates on to renters.  While there is a public perception that rents and interest rates tend to move in tandem, the RBA says this is more a case of correlation rather than causation. The RBA says: “Pinning down the relationship between interest rates and rents is tricky because both will tend to move together with the economic cycle. “For example, a strong economy, with a pick-up in income growth, will see increased demand for rental properties. This will put upward pressure on rents. At the same time, interest rates may be raised to reduce inflationary pressures.” So they’re saying that rising rents and rising interest rates tend to occur at the same time, rather than one causing the other. The sample period for this research includes two other interest rate tightening cycles, including immediately before and after the global financial crisis. RBA governor Michele Bullock said in August the fundamental reason rents were increasing so quickly was because there was not enough housing supply to meet demand. Bullock told a parliamentary hearing: “Landlords can only pass on interest rate rises into rents if there is demand for those properties. If there isn’t, then it’s very difficult for them to pass those costs on.” The researchers said that housing demand had been strong due to high population growth and an increase in the number of households with spare rooms.  Meanwhile, supply had been hampered by rising construction costs, which the RBA says have increased 40 per cent over the past four years – although other estimates say they have risen more than 50% in the past three years. You could argue that the RBA has a vested interest in the argument they are presenting, because many believe that higher interest rates have driven increases in rents over the last few years - and therefore Bullock and the other financial elites on the RBA board are to blame for the rise and rise of residential rentals. What do I think? I don’t think much of the RBA and its arrogant out-of-touch behaviour which sees only economic graphs, charts and numbers – and displays no feeling for the impact of their ivory tower decisions on ordinary Australians, without achieving the end goal of actually taming inflation. But, I think they’re correct in this instance. Higher interest rates have not caused higher rents. It doesn’t matter how high interest rates go, or any of the other rising costs of property ownership – investors can increase rents ONLY if there’s high demand and low supply. It’s historically low vacancies that have caused rents to rise and rise – not high interest rates.  

How long could we reasonably expect governments to take, to sort out a problem like the rental shortage? I ask the question because we have had the problem of a shortage of options for tenants in Australia – and the consequent steep rises in rents - for a very long time. And it keeps getting worse, not better. The latest data from SQM Research shows that, nationally, the vacancy rate got a little worse last month, dropping from 1.3% in August to 1.2% in September.  Three of our capital cities have vacancies well below 1%. And in six of the eight capital cities, vacancies stayed the same or got smaller in September. In only two cities was there a slight improvement.  But the key piece of information is the longevity of this rental shortage crisis.  Australia has had vacancies below 1.5% for close to three years now. It’s generally considered that a balanced rental market – one in which there is ample supply of homes for tenants to choose from and rents are stable – is one where vacancies are at least 3%. The data from SQM Research shows that Australia has not had a vacancy rate as high as 3% at any time in the past 20 years. The closest we came was 2.9% in April 2020 after the onset of Covid caused major disruption to property markets.  Since then, the national vacancy rate has dropped sharply, reaching 1.2% in March 2022 – and it has hovered between 1% and 1.3% for the past two and a half years. According to SQM Research, a further 1,700 rental properties disappeared from Australia’s rental market in September – at a time when the nation’s population has surpassed 27 million. The SQM report said: “The total number of rental vacancies now stands at 37,932 residential properties, a decrease from 39,665 in August.”  There are clear reasons why we have had this steady decline in the number of properties available for rental, a shortage which has caused rents to rise and rise. Mostly, those reasons relate to the decisions of politicians, particularly state politicians, in making life increasingly onerous for the investors who provide over 90% of the homes that people rent in Australia. State and territory governments have increased taxes on investors and have changed the rental laws in ways that have eroded the rights of the owners. This has led to a reduction in the number of homes available for rental. In Victoria, the state with the most onerous conditions for investors including big tax increases, the number of rental properties in the state has fallen by 22,000 so far this year, as the investor exodus gathered momentum on the back of anti-landlord legislation. That’s according to new data from the Department of Families, Fairness and Housing. And its data supports a trend identified in the latest Investor Sentiment Survey published by PIPA – the Property Investment Professionals of Australia (PIPA). The survey described a "sell-off of investment properties around the nation" that has "continuing unabated" and "fuelling fears of an even tighter rental market". But the problem is most acute in Victoria. PIPA Victoria board director Cate Bakos says legislative changes and increased taxes are driving investors from the state. A new land tax regime, minimum rental property standards legislation, and policies that are seen as overly tenant-friendly have caused many investors to sell up in Victoria. Nicola McDougall, the Chair of PIPA says: “This is predominantly due to its plethora of anti-investor rental reforms, as well its new land tax regime that is set to cost investors billions of dollars over the years ahead.” PIPA’s annual investor sentiment survey found Victoria was regarded as the “least accommodating” state or territory for property investors in the nation, with 22% of survey respondents indicating they had sold at least one dwelling in Melbourne in the last year. As a consequence, rental availability has fallen and rents have risen. Data from Domain shows that the vast majority of Melbourne suburbs recorded rent rises this year, continuing a trend that has extended over several years. According to the Domain rent report for the September quarter, the median house rent in Melbourne at the start of 2022 was $440 a week. Now it’s $580 a week. The median unit rent was $375 a week in January 2022 and now it’s $550 a week. That’s an increase of almost 50% in less than three years. But the problems keep getting worse, with NSW being the latest state government to pass new laws detrimental to landlords. REINSW CEO Tim McKibbin says the lessons for the NSW Government are crystal clear but have been disregarded. He says: “The removal of landlords’ rights under the guise of populist rental reforms has had a clear negative impact on renters elsewhere. “The rental reforms by the NSW Government will result in more investors selling up or opting for a short-term accommodation strategy, both of which remove more properties from the private rental market. “This is already happening and it’s happening at a time when the NSW population is increasing by over 15,000 people each month. The rental market is in crisis and we need solutions, not reforms that we know from recent experience will make the problem worse.” And that pretty much sums up the seriousness and absurdity of this ongoing issue. Australia has had a rental shortage crisis for several years but the only policies implemented by state governments have made a bad situation even worse.  

There is one thing that Australian politicians are really good at – possibly the only thing - and that is diverting attention from the real issues and scapegoating others for the problems that they, the politicians, have caused. Right now, the core issues impacting Australian households include the housing shortage, the high cost of creating desperately needed new homes, the chronic rental shortage and the reality that rents keep on rising. It’s noteworthy that the recent AGM of the Commonwealth Bank reported that they have had to provide emergency payment arrangements to 132,000 customers who are struggling to pay their mortgage amid a cost of living crisis and very high interest rates. We also have saturation media coverage of the plight of tenants paying higher and higher rents amid a chronic shortage. So, what are politicians and journalists obsessing over? The issue of negative gearing. Now, what relevance does negative gearing have to the issue of the housing shortages and the high cost of building new homes and the chronic shortage of rental properties? The answer is: None. It has no relevance whatsoever. Scrapping negative gearing won’t fix any of these problems – but it will make some of them noticeably worse. Recently columnist James Kirby wrote about this in The Australian. He wrote: “Experts are warning the government’s review of property tax concessions could make housing affordability worse, with New Zealand’s recent failed attempts to do something similar cited as an example of what could go wrong. “After the NZ government cut tax incentives for property investors three years ago, the volume of investment funds entering the residential market halved. And as the supply of rental property evaporated, rental prices soared.” Kirby wrote: “The attempt to change New Zealand’s version of negative gearing – and its capital gains tax regime – were widely seen to have backfired and a new government has since progressively reversed the original changes.” However, Kirby points out, the Treasury in Canberra is now assessing the same tax territory with a review of negative gearing (where property investors can declare losses against tax) and Capital Gain Tax. Kirby says: “While Anthony Albanese has distanced himself from the review – insisting it is an internal move by Treasury – tax changes around property investment are highly sensitive, especially as the ALP’s Shorten-era election loss was significantly due to unpopular plans to restrict investor tax incentives.” Ray White group chief economist Nerida Conisbee says: “The current tax incentives ensure we have enough rental housing, if you cut those incentives you only have to look at New Zealand to see what may happen – New Zealand is now the least affordable rental market in the world.’’ Kirby wrote: “Put simply, making property investment less attractive will drive investors out of the market. The only question is the degree to which they will flee and that in turn depends on conditions at the time. In New Zealand the reform measures were imposed as prices were falling and interest rates were rising – exacerbating the blowback from investors who cut their funds in the NZ market from $21bn in 2021 to just $11.8bn in 2024.” Kirby also referred to the fact that Paul Keating as Australian Federal Treasurer scrapped negative gearing in 1985 and then, two years later, reversed his decision and reinstated it in 1987. And that was because the end to negative gearing benefits caused a shortage of housing across Australia and rents rose sharply. It’s time for Australian politicians and journalists to stop obsessing over side issues like negative gearing and focus on the core issues in the housing industry – which is the shortage of dwellings, the high cost of fixing that shortage and in particular the chronic under-supply of rental properties.  

Australia is struggling with a number of crisis situations – a cost-of-living crisis, a housing affordability crisis and a rental shortage crisis. Our beloved Prime Minister Anthony Albanese has declared on many occasions how much he cares about the plight of ordinary Australians in dealing with these issues. But, as the old saying goes, actions speak louder than words – and that is particularly relevant to our elected representatives who love to stand before the media cameras and declare their concern for the people but fail to match their words with appropriate actions. So, let’s look at how the Prime Minister has handled his personal housing market issues in 2024. In May this year Albanese evicted a long-standing tenant in a property he owned in the Sydney suburb of Dulwich Hill. At the time, the tenant declared he was shocked to learn he no longer had a place to live and had no idea he was going to be kicked out of his home of four years. At the time the tenant said he had tried to seek clarification of the situation and why he had to leave but did not receive a response. He said at the time: “It seems a little bit misaligned with the messaging Labor has been putting out ... about recognising how difficult it is for renters.” He also said: “It’s a crippling blow for me right now. I have mixed emotions in calling this out. I voted for Albo at the last election and am broadly a supporter of his policies.” So, PM Albanese, having got rid of the pesky tenant, then put the Dulwich Hill property on the market, with an auction scheduled for October. This was a three-bedroom townhouse at 29B Lewisham St in Dulwich Hill which Albanese bought for $1.17 million in 2015 and was advertising for auction with a price guide of $1.9 million. If it sold at that price, it would represent a 62% gain in nine years. But then, at the last minute, the Prime Minister cancelled the auction and decided not to sell the property after all. He evicted his tenant because he said he wanted to sell and then decided NOT to sell. Then, in the same week, it was revealed he had spent $4.3 million on a new home on the Central Coast north of Sydney. This is Albo the battler we’re talking about, the guy who loves to talk about his tough working-class roots and growing up in a housing commission environment. Albanese said he planned initially on leasing out the property with views over Copacabana Beach, with estimates he will pocket between $2000 and $2500 a week in rental income. A Labor MP, who declined to be named, said the purchase was “not a great look” for Albanese, who will have to fight hard to hold on to government at the next federal election. Responding to claims the purchase was a bad look in a cost-of-living crisis and a housing market crisis, Albanese, who earns more than $600,000 a year, said he knew “what it is like to struggle”, referring to his upbringing in public housing in Sydney’s Camperdown. “I am much better off as Prime Minister. I earn a good income. I understand that,” he said. Columnist Dennis Shanahan wrote in The Australian: “There are two unequivocal things to say about Anthony Albanese’s decision to buy a $4.3 million cliff top, ocean view home on the NSW Central Coast. The first is — good on him. Well done for living the Australian dream of home ownership and getting there on his own. “The second is this — this has to be the dumbest, most damaging piece of political tone deafness and timing since Tony Abbott appointed Prince Philip as a “Knight of the Order of Australia” in the Australia Day honours’ list in 2015.” Shanahan wrote: “No matter what Albanese says to justify the purchase, it’s a bad political look that makes him appear out of touch with people renting and trying to buy their own home. It also raises the immediate thought that it’s a retirement parachute for after the next election.” Meanwhile, on the same day as the $4.3 million purchase was revealed, it was the AGM of Commonwealth Bank – which reported that more and more customers are feeling the pinch from the cost-of-living crisis. Commonwealth Bank chief executive Matt Comyn revealed huge numbers of Australians are falling behind on their mortgage repayments. He told shareholders the bank has offered tailored hardship payment arrangements to 132,000 customers over the past year. Comyn said: “Households are continuing to find it very challenging.” But certainly not the household of our battler Prime Minister. Albo is doing very well indeed. He’s just paid over $4 million for a home he won’t be living in and he has decided he doesn’t need to sell his $1.9 million investment property in Sydney to afford it. And that’s perplexing news for the tenant he evicted on the grounds that he needed to sell the property, before subsequently changing his mind.

Residential real estate abounds with fallacies and misconceptions, mostly created by dishonest politicians, biased journalists and economists who don’t understand property. One of the biggest is the one that claims that so-called prime property shows the best capital growth. A year ago I attended a national conference for real estate professionals at which a keynote speaker expressed the view that you had to buy “prime” to get good capital growth – and indeed proclaimed that if you couldn’t buy prestige property you shouldn’t buy at all – or at least wait until you could afford something in the higher price ranges. I had to challenge that view in question time because everything I’ve observed over four decades in real estate research absolutely contradicts this notion. I was astounded that something presented as a real estate expert could make such an unsupportable claim and give such terribly bad advice. It’s amazing how many people still cling to this out-dated and plainly inaccurate view of real estate, which is emphatically contradicted by all the evidence. Many still believe that prime out-performs affordable, that the closer to the CBD the stronger the capital growth, that capital cities outdo the regions, and that the biggest cities show better growth over time that the smaller ones. All of those opinions are fallacies. They’re just plain wrong. Whether you examine the past quarter, the past year, the past three years, the past decade or the past 20 years, you will find compelling evidence that the regions have outperformed the capital cities, that the biggest cities have under-achieved, that affordable areas have excelled on capital growth – and that proximity to the CBD is utterly irrelevant in real estate investment. And you can add another misconception that increasingly is being proven wrong – the one that says houses on land show better capital growth than apartments. An example of what the research shows is provided by PropTrack which earlier this year examined how much dwelling values had grown in the four years since Covid disrupted property markets. The leading jurisdictions for price growth were, in order, Regional Queensland, Regional SA, Adelaide, Brisbane and Perth. The bottom ranking markets among the capital cities and state regional markets were Sydney and Melbourne. PropTrack also looked the local markets with the highest growth over that four-year period and found that all of the Top 10 locations were regional or outer-ring areas of the smaller capital cities. The cheaper areas of Adelaide and Brisbane were most prominent for high capital growth, as well as regional areas of Queensland and South Australia. Now, all of that is good news for most people approaching property investment who can’t afford to buy in those higher price brackets – because it means you don’t need to buy expensive homes to do well in real estate. The typical investor I encounter wants to buy a property below $500,000 because they can’t afford to go higher. The really good news is that buying affordable real estate in good locations is a win-win-win situation: a lower buy-in price, a higher rental yield and good prospects for capital growth. We call this kind of real estate The Cheapies with Prospects. Let me give you just one example of how Cheapies with Prospects locations can deliver the most spectacular capital growth. Many times in the past few years I have made the observation that the cheapest houses in capital city Australia were located in the affordable northern suburbs of Adelaide – specifically in the local government area of Playford. A few years ago many suburbs had median house prices in the $200,000s – and , let’s face it, this was seriously downmarket real estate. In the past 12 months these suburbs have delivered extraordinary capital growth. Most suburbs in the City of Playford have grown more than 20% in the past 12 months, seven suburbs which have lifted over 30% - including Elizabeth North up 33%, Eyre up 38%, Davoren Park up 41% and Elizabeth South up 55%. In Davoren Park, the median house price three years ago was just $190,000 and now it’s $460,000. Typical houses in Elizabeth North cost $195,000 three years ago and now they’re $425,000. There’s been similar spectacular price rises right throughout this precinct in the affordable north of Adelaide. Keep those figures in mind next time someone tells you that you have to buy expensive houses in prestige areas to get the best capital growth.  

There’s endless commentary about housing affordability in Australia but very little awareness that the fundamental issue is the high cost of creating new homes – and that our politicians are the cause of the problem. The value of dwellings across the nation is underpinned by the cost in building new ones – and, in Australia, that cost is incredibly, ridiculously high. And it’s high because of the policies of our elected representatives, at all levels of government, but particularly state government politicians. Right now, after massive increases in building costs in recent years, you cannot build a new house in Sydney, for example, for less than half a million dollars. A new study has found that the minimum cost of building a Sydney house is $2,300 per square metre – and based on the average size of a new house in New South Wales, that means the cheapest you can build the standard brick and tile house is $550,000. Now, Sydney is the most expensive capital city in Australia to build a new home, but it’s not significantly cheaper elsewhere. Research published earlier this year by Master Builders Australia found that the average cost of building a new house nationwide was $490,000 – having increased 53% in the past three years. Keep in mind that that figure does not include the cost of the land – just the construction cost for the average brick and tile new house. Master Builders said the cost of building homes had been inflated by higher government taxes, new government regulations which have added massively to the cost of construction, bureaucratic delays in getting building approvals, the increasing cost of materials and the shortage of tradespeople. Tradies are in short supply primarily because so many are now working on big-ticket government infrastructure projects and are no longer available to work in the home building industry. Keep in mind, all the figures I have quoted relate to the cost of construction and do not include land cost. According to the recent study on Sydney home construction costs, the average price of vacant residential land in Sydney is over $640,000. However, it depends on where you buy land and you may have to pay far more than that, especially in established suburbs. It means that establishing a new house on a block of land can typically cost more than a million dollars in Sydney. It’s cheaper, but still incredibly expensive, elsewhere in Australia. I have had recent conversations with a number of builders and developers of residential estates – people doing projects in outer-ring areas of capital cities and in regional towns – and they all say the same thing: they cannot produce a new house on a (very small) block of land for less than $750,000. I have also spoken to the head of one of the largest development companies in Queensland who says the biggest cost escalations in the residential property industry have been in building high-rise apartments. The costs have risen so much that it’s unviable for this company to build apartments unless they can be sold for at least $1 million each. We know from other reports that dozens of major apartment developments have been cancelled because the cost of construction is too high to make them viable. These outcomes speak to all the major issues afflicting residential property at moment – the shortage of new dwellings, the serious shortage of rental homes and rising rents, and the overall affordability issue. For those facing the high cost of building new homes in Australia, the reality is that (depending on location with Australia) between 35% and 50% of the cost is government taxes, fees and charges. All levels of government – local, state and federal – treat the housing industry as a cash cow. In other words, they milk the housing industry for taxation revenue, while claiming to care about the high cost of housing. They have further inflated the costs of creating new homes by passing laws that change the design of homes – theoretically to make them safer, more accessible or more energy efficient. These imposed design changes have added massively to the cost of building dwellings. The new construction code imposed by our elected representatives, alone, has added up to $40,000 to cost of building a new house in Australia. The same problems exist everywhere in Australia. That includes in Canberra, where housing has become a major issue in the lead-up to the ACT election. A peak body for residential housing wants the next ACT government to implement a four-year moratorium on new regulation and taxes on home building, to give the industry a chance to recover and deal with the shortages. The Housing Industry Association ACT also wants the government to relax planning rules across some of the territory's residential zones to allow for larger homes and higher density. It says the ACT is failing "across almost every housing metric". He pointed to a reduction in residential dwelling commencements, the increased costs to service mortgages and low rental vacancy rates. The HIA says: "The private housing market has been squeezed by a lack of shovel-ready land, and an explosion in regulation, red tape and taxation. Yet, at the same time as the private construction and rental sectors are constrained, there has been a failure of government to meet its obligations for public housing. "The ACT has a housing emergency. To do nothing other than continue with the status quo is not an option." Now, those comments are directed at the dire situation in Canberra, but could be applied equally to most cities across the nation. Politicians have created the problems and are clueless about how to resolve the issues that are causing prices and rents to rise, and the cost of building new homes to escalate.  

How relevant is population growth data for people choosing where to buy? According to the theories espoused by some, the best places to buy are the ones with the highest population growth. But the evidence suggests otherwise. For example, take a look at the latest data on population growth across Australia, published by the ABS recently. It shows that one of the states with the highest population growth has been one of the worst performers recently on price growth, while one of the states with the lowest population growth has been one of Australia’s best performers on price growth. For the record, the ABS data on population for the 12 months to the end of March 2024, shows that the national population is now above 27 million  - 27,122,411 to be exact. Over 600,000 was added to the national population in that 12-month period which, while very high growth, was less than the number added in the 2023 financial year. 83% of the national population growth has been due to overseas migration. In 12 months ended March 2024, Australia added over 509,000 net migrants (made up of 718,000 people immigrating to Australia and 209,000 emigrating).  Western Australia recorded the highest percentage growth in the 12 months to March, with its population rising 3.11%, compared to the national average of 2.32%. And that, of course, does align with house price outcomes, with Perth recording the highest price growth among the capital cities and WA achieving the highest price rises among the state and territory regional markets. The next highest annual growth in population was in Victoria, which rose 2.72%. But property prices haven’t been rising in Melbourne or Regional Victoria – in fact, they’ve gone backwards a little in the past year. So, high population growth, particularly from overseas migrants, has not pumped up property markets in Victoria. One of the weakest population growth rates has been South Australia, up just 1.48%, but Adelaide has been achieving exceptional growth in house prices and unit prices, bettered only by Perth. And Regional SA has consistently been an out-performer on property price growth as well. Clearly, based on this evidence, population growth in not the big factor. It may A FACTOR, one of a number of factors which can influence property markets, but clearly it’s not the big driver.  

The latest Australian Bureau of Statistics data has recorded a decline in the number of dwelling approvals across the country. Total dwelling approvals saw a drop of 6.1 per cent in the month of August, at a time when Australia needs to be building a lot more homes. According to ABS head of construction statistics, Daniel Rossi, private dwellings excluding houses were the main contributor to the decline – in other words, there has been a big decrease in approvals for attached dwellings like units and townhouses. This has resulted in a 16.5 per cent fall in approvals for those types of attached dwellings. Furthermore, the value of total residential building fell 6.7 per cent to $7.96 billion while the value of non-residential building rose 11.5 per cent to $5.30 billion. The numbers suggest that there’s a lot of construction projects happening in Australia but not enough of them are new dwellings in a nation that has a severe shortage. A lot of government resources are being directed into big infrastructure projects, and a lot of tradespeople are working on these projects, when the nation really needs these resources to be going into building new homes. One of the measures of construction activity in Australia is the number of cranes on the skyline. The infrastructure boom has pushed the total of non-residential cranes across the nation to a record 370, while slumping investment in new housing has reduced the number of residential cranes to a two-year low in the latest report on the country’s construction sector. The infrastructure boom is keeping construction costs high and making it harder for private projects to stack up, according to Domenic Schiafone, the head of research for quantity surveying firm RLB, which produced the report. Other data shows that in the 2024 financial year, the number of new homes built in Australia fell 9% to the lowest level since 2011. If the current rate of building continues, Australia will build around 800,000 over five years, when the Federal Government target is 1.2 million new homes – a figure that was never realistic and looks, now, increasingly fanciful. HIA chief economist Tim Reardon agrees there are many challenges making dwelling development difficult. According to Reardon, rising taxes for foreign investors and rising regulatory costs generally are negatively impacting building approval figures. Reardon notes that house approvals in Perth and Brisbane are faring much better than in Sydney and Melbourne.  He says confidence in the Melbourne new home market has been adversely impacted by two new taxes, while policy debates generated by recent Federal Government actions are making it harder for the industry to achieve the national target of 1.2 million new homes. Reardon says: “Recent discussions on negative gearing and capital gains tax arrangements for residential property are undermining confidence in new home building. The government’s focus should be on lowering the taxes, regulatory costs and excessive charges that make up as much as 50 per cent of the final cost of a house and land package.” That’s worth repeating – that, in some parts of Australia, up to half of the cost of a house and land package comprises the taxes, fees and charges imposed by government. The official figures show that total housing starts for the year to June totalled about 159,000, which is 81,000 homes short of the 240,000 the country needs to be building each year to meet the government’s increasingly aspirational 1.2 million-home target over the five years to 2029. If building continues at this pace, Australia will build less than 800,000 new homes over the next five years – 400,000 short of the government’s target.  

The rise and rise of the unit market is keeping the Greater Sydney market busy, although below the exceptional levels seen in some of the other market jurisdictions across Australia.  Unit markets are considerably more positive than house markets in our most expensive capital city and the market share of attached dwellings continues to rise. In our latest analysis, well over half of all residential sales across Greater Sydney are attached dwellings. In most of the Greater Sydney municipalities where sales activity is strong, it’s the unit markets that are most active. Outer ring house markets are generally subdued, suggesting that those seeking affordable options are choosing apartments and townhouses.  The dominance of attached dwellings in Sydney market performance can be seen in various metrics, resulting from our most recent analysis of activity. While 45% of locations with house markets have positive rankings in our latest analysis, 67% of unit markets are positive. This includes 24% of house locations classified as rising markets, in contrast to 37% of unit locations. This coincides with further evidence that a growing share of dwelling sales in the Greater Sydney market are attached dwellings.  Comparing the June Quarter results for the past four years, the market-share of units was 48% in 2021, 50% in 2022, 52% in 2023 and 54% in 2024. So the latest quarter has shown a resurgence in sales activity in Sydney, inspired by rising demand for attached dwellings. In the City of Sydney LGA, two-thirds of suburbs have positive ratings, headed by the unit markets in Sydney CBD, Surry Hills, Waterloo, Chippendale, Darlinghurst, Elizabeth Bay and Redfern – all rising markets. In the Canterbury-Bankstown LGA, which has recorded a steady rise in sales volumes over the past 18 months, 60% of locations have positive ratings, most of them unit markets. Those with rising sales activity include the unit markets in Bankstown, Belmore, Canterbury, Campsie, Lakemba and Wiley Park. The City of Parramatta fits this pattern also. Two-thirds of markets have positive ratings and 10 of the 13 ranked as rising are unit markets – headed by North Parramatta, Sydney Olympic Park, Toongabbie and Westmead. Top end municipalities that continue to pump strongly include the Woollahra LGA, where there have been steady increases in quarterly sales over the past 18 months. The apartment markets in Double Bay, Vaucluse and Edgecliff are all rising, while those in Rose Bay, Woollahra and Paddington have consistent buyer demand. The City of Randwick is also very consistent with its sales levels, boosted by rising activity in the unit markets of Kensington and Matraville, the house market in Randwick, and both houses and units in Maroubra. In the City of Waverley, another place with steady quarter-by-quarter sales, the leading locations with rising sales are the unit markets in Bondi, North Bondi, Bondi Junction and Waverley. In the outer-ring areas, the City of Penrith at the western fringe of Greater Sydney has recorded a recent upsurge in market activity and six out of ten markets have positive rankings. Rising locations include the house markets in Jamisontown, Kingswood, Penrith, St Marys and Werrington, as well as the unit markets in Colyton, Kingswood and St Clair. But the City of Liverpool is where house markets are doing best, amid a recent upturn in sales volumes – led by Green Valley, Moorebank, Prestons and Wattle Grove. The unit market in the central suburb of Liverpool is also notably strong.  

The Regional New South Wales market overall is solid, without excelling at the levels seen in other regional areas like Queensland and Western Australia, but with individual out-performers. There is hesitancy in the Regional NSW market overall. It has a high number of locations where buyer activity is lukewarm and price performance below the levels seen elsewhere in the nation. It’s noteworthy, however, that Regional NSW has seen better performance in its unit markets than its house markets, which is part of a national trend. Overall sales levels have improved, continuing a pattern of recovery over the past year, but remain well below the peak levels of 2021. Regional NSW saw a major decline in its market in 2022 and early 2023, with signs of gradual revival seen since mid-2023. Amid this overall patchy performance, there are some standout growth markets, based on individual Local Government Areas including those in the Wollongong, Newcastle and Albury regions. The Wollongong region continues to be a state-leading star. The City of Wollongong LGA has an above-average number of rising locations and the nearby Shoalhaven LGA continues to thrive: quarterly sales over the past 18 months have been rising steadily, showing one of the best patterns of growth in the nation. The Shellharbour area is also part of this region’s growth. Newcastle remains an outstanding market and neighbouring LGAs including Lake Macquarie, Port Stephens and the Hunter Valley municipalities all have busy markets. The Mid Coast LGA has delivered steady increases in market activity over the past year, quarter by quarter. Both Forster and Tuncurry have rising markets and Taree is highly consistent. While those markets are heading into over-drive, some of the high-profile regions of NSW have not yet got out of second gear.  The Central Coast still has a degree of uncertainty; Byron Bay is showing signs of recovery, after a high peak in 2021 and a deep post-boom trough in 2022 and 2023, but remains well peak the 2021 boom levels; and both Coffs Harbour and Port Macquarie have had patchy results over the past year, with indications of recovery in the latest quarter. The Tweed LGA is showing signs of joining the boom experienced north of the border in the Gold Coast region, without yet being fully on board. Elsewhere in Regional NSW, Dubbo, Wellington, Orange, Gunnedah, Inverell and Tenterfield are classified as rising markets; Goulburn and Mudgee are rated as recovery markets; and Armidale, Glen Innes and Parkes stand out for consistent sales activity.  

Are you ready to capitalise on Australia’s next big wave of growth? Join us for an exclusive webinar hosted by Tim Graham of Hotspotting.com.au with special guest Zen Christofi of Reventon as we dive into Second-Wind Markets: Strategies for Savvy Investors. In this insightful session, you’ll discover: What are Second-Wind Markets?  Gain a clear understanding of post-boom correction phases and why some markets are positioned for renewed growth. National Overview of Second-Wind Markets Explore key factors driving the resurgence of these markets, from interest rates to housing shortages and immigration trends.  Real-World Case Studies Investment Strategies Learn expert strategies on how to time your entry into second-wind markets and balance capital growth with rental yields. Exclusive Insights from Zen Christofi Zen Christofi will share his expert analysis of these markets and discuss actionable strategies for savvy investors like you. What you will learn: Expert insights into Australia’s emerging second-wind real estate markets. Proven strategies for making informed, high-growth investment decisions. To contact Zen and his team at Reventon, please visit: www.reventon.com.au

Household wealth in Australia keeps rising and the key reason for that is residential property – which accounts for 68 per cent of the total wealth of Australian households. New data from the Australian Bureau of Statistics (ABS) shows that total household wealth has reached $16.5 trillion. Now, that number doesn’t mean much to the average observer, so here are some other numbers that give it some context. That household wealth figure represented a 1.5 per cent rise in the June quarter and the current level of the highest on record. It’s 9.3 per cent higher than a year ago, and it means the overall level of household wealth in the nation has increased for seven consecutive quarters, driven primarily by residential land and dwellings. Dr Mish Tan, head of finance statistics at the ABS, notes that house prices have continued to rise across most states and territories, despite high interest rates, and said this largely reflects ongoing housing supply constraints.Property assets reached an unprecedented level of $11.2 trillion as of 30 June 2024, making up around 68 per cent of household wealth. The surge in household wealth over recent years has largely been attributed to rising property prices. Households also hold $1.72 trillion in cash and deposits or 10.4 per cent of their total net worth, alongside a record $3.94 trillion in superannuation assets. Now, one of the ways that residential real estate has pumped up household wealth in the past year or so, is the steady rise in the number of suburbs across Australia with a median price above $1 million. According to CoreLogic, the number of Australian suburbs with a $1 million median price for either houses or apartments has reached a new record high. Over the 12 months to September, 218 more suburbs surpassed a $1 million median for houses or apartments. Australia now has 1,257 suburbs with a median house value at or above $1 million, as well as 140 suburbs with a median apartment value at the same level. And if you want to discover which suburbs are most likely to join the Million Dollar club in the near future, get yourself a copy of our newest report – the national Top 10 Million Dollar Hotspots report. Hotspotting has published this report in conjunction with multi award winning buyers agency Propertybuyer – and it provides valuable insights into where to buy real estate in locations where the median price is below $1 million, but expected to surpass the milestone figure in the not too distant future.  

ANZ, the worst forecaster on property price outcomes in the nation, has just published its forecasts for what will happen with house prices in 2024. Yes, that’s right. They’ve published, in October, forecasts for house prices this year, a couple of months before the end of the year. Why have they done this? Because it’s the only chance ANZ has of getting it right with its property price forecasts.  Essentially what it has done with these “predictions” is take the existing situation and extrapolate it two months into the future. So, you will be amazed to learn that they’re predicting that Perth, Adelaide and Brisbane will lead on price growth in 2024. You’d pay good money for insights as sharp as that, right?! The big four banks, collectively, have terrible track records in forecasting property price outcomes.  They are ALWAYS – and I do mean ALWAYS – wrong, but usually they are spectacularly wrong. But ANZ bank is the worst of them. At the start of 2024, it predicted house prices would fall across the nation in 2024 – by as much as 15%. They did the same at the start of 2023 – forecasting massive decline in house prices. Of course, it’s now clear that they got this horribly, horribly wrong – because they just don’t understand real estate dynamics. Their reason for expecting prices to collapse in 2023 and again in 2024? Because of high interest rates. Essentially that’s all they have in their kit bag of real estate knowledge. Interest rates high or rising? Property prices fall, according to the ANZ mindset. Except they don’t – and they didn’t. ANZ has a few problems at the moment. It’s been taken to court, successfully, by federal authorities like ASIC because it’s not only incompetent, it’s an organisation with dodgy ethics. But once they sort out their legal issues, they might turn their attention to sacking their senior economists who continually pump out ridiculous reports claiming to be research – including absurdities like forecasting property price outcomes for the calendar year, just two months before the end of the year. The report, rather comically, is titled “Property Insights” – but there is nothing insightful in this report or anything else emanating from ANZ any time in the past several years.  

The biggest paradigm-changing trend in Australian real estate, the rise and rise of apartments, is confirmed by the latest price data from the usual suspects – and is reflected in our choices for the latest edition of our most popular report, the National Top 10 Best Buys report. The latest price data from CoreLogic shows that unit prices are rising faster than house prices. While news media, in its predictable fashion, focussed on the perceived negatives in the CoreLogic Home Value Index published in October, my analysis of the figures is that they provide further evidence that rising demand for attached dwellings is creating out-performance on price growth. Perth still leads on growth in house prices, but the numbers for growth in unit prices are considerably stronger, both for the past month, the past quarter and the year to date. According to CoreLogic, Perth prices rose 1.6% in September for houses but 2% for units. In the September quarter, Perth house prices increased 4.6% but unit prices were up 6.2%.  And, for the first nine months of 2024, house prices are up 17% but unit prices more than 20%. It’s the same for one of the other hot city markets, Adelaide.  House prices in Adelaide has recorded strong rises in the month of September, the September Quarter and the year to date, but unit prices have increased more in each of those time frames. The price outcomes are even more emphatic in Brisbane: house prices rose 2.4% in the September Quarter, but unit prices rose 4.8%, exactly twice as much. And the year to date growth numbers are 10% for houses but 14% for units. In both Sydney and Melbourne, which have not been matching the smaller cities on growth, the numbers are nevertheless stronger for units than for houses. And nationally, median prices grew 0.4% for houses but 0.6% for units in September, while in the September Quarter houses were up 1% but units 1.2%. The differential is greatest in the Combined Regional markets, with units outperforming houses in the month, the quarter, the year to date and in the past 12 months. And that holds true for most of the individual state regional markets, notably Western Australia, New South Wales and South Australia. In Regional Queensland, where many regional cities have highly active markets, the numbers are fairly even. Overall, these numbers are the latest piece of evidence that the old paradigm of real estate, that houses always outperform units on capital growth, is changing and in many locations HAS changed. As we comment in the report we recently published with marketing company Nuestar, the one we call The Rise and Rise of Apartments, there is growing buyer demand for attached dwellings across Australia. Units now accounts for more than half of all sales in the Sydney market and they have a growing market share in Melbourne, Brisbane and Canberra as well. In the booming Perth market, where houses are no longer the cheapest in capital city Australia following massive price growth recently, more and more buyers are pivoting to the more affordable and often better located unit products in the market. And now this compelling trend in national real estate is a big influence on our choices to the nominated locations for the new edition of the National Top 10 Best Buys.  Many of the nation’s strongest locations for unit demand are prominent in this report – as well as some of the most vibrant house markets in key locations across Australia.  

Join us for an insightful and essential webinar hosted by Terry Ryder, Founder of Hotspotting, and Corinne Bohan, Managing Director of Image Property, as they dive into the crucial role of professional property management in today’s rapidly changing rental landscape. In this engaging session, you'll discover: Building Your Winning Team: Learn why investors must focus on assembling a strong management team before growing their property portfolio and how a first-rate property manager can be a game-changer, especially in the face of evolving regulations. Navigating the Rental Market: Gain expert insights into the latest rental market trends, including the impact of rising rents, affordability ceilings, and the increase in shared living arrangements. Discover how to effectively screen tenants and ensure compliance with new legislation. Maximising Returns with Dual Living: Explore the pros and cons of dual living and co-living properties. Understand the financial benefits, potential pitfalls, and what to consider before diving into this growing trend. Proactive Maintenance: Learn how proactive property maintenance can help you avoid costly repairs, and hear expert tips on building a solid relationship with your property manager to ensure your investments are well cared for. Whether you're an experienced investor or just starting, this webinar will provide you with the knowledge and tools to optimise your property management approach and stay ahead in a competitive market. To connect with Corinne and her team, please visit www.imageproperty.com.au

The new Spring edition of The Price Predictor Index provides emphatic confirmation of the most compelling trend in Australian real estate: the escalating demand for apartments and their challenge to houses on capital growth performance. We have been speaking about the rise and rise of apartments for the past 18 months and there is a growing body of evidence which confirms that more and more buyers are opting for attached dwellings: units, apartments and townhouses. Our analysis of sales activity data for the latest quarter for the Spring edition of The Price Predictor Index reveals that this trend is dominating markets across Australia. For example, there is a stark contrast in the Sydney market. In simple terms, unit markets are pumping and house markets are not - and the market share of attached dwellings continues to rise. In most of the Greater Sydney areas where sales activity is strong, it’s the unit markets that are most active. Outer ring house markets are generally subdued, suggesting that those seeking affordable options are choosing apartments and townhouses. The dominance of attached dwellings in Sydney market performance can be seen in various metrics. While 45% of locations with house markets have positive (rising, recovery, consistent) rankings in this analysis, 67% of unit markets are positive. This coincides with further evidence that a growing share of dwelling sales in the Greater Sydney market are attached dwellings. Comparing the June Quarter results for the past four years, the market-share of units was 48% in 2021, 50% in 202, 52% in 2023 and 54% in 2024. There’s a pretty clear pattern emerging there. Sydney’s experience, with attached dwellings outperforming detached, is part of a strong national trend that is also evident in other cities and some of the regional jurisdictions. In the Brisbane City LGA, elevated demand for units is driving overall activity. In Melbourne, which overall continues to under-achieve, a key exception is provided by inner-city unit markets. And Canberra is experiencing a similar scenario.   While just over half of Canberra markets overall have positive ratings, 78% of unit markets have rising, recovery or consistent classifications based on sales activity trends. Of the 36 unit markets in our Canberra analysis, only 3 have negative ratings.  While only 35% of house markets are classified as rising markets, 61% of unit markets in Canberra have this rating. Affordability is likely a major driver of this trend. Canberra has a median house price close to $1 million (PropTrack data), higher than Melbourne and Brisbane. But its median unit price is $605,000, notably cheaper than Melbourne, Brisbane and Sydney, and on a par with Adelaide. The market share of units is rising year by year and attached dwellings now account for 44% of dwelling sales in Canberra, compared to 41% in 2021. In booming Perth, the strongest markets in Perth now are well-located locations with a major presence of attached dwellings.  While the most popular house markets for home buyers and investors (mostly those at the affordable end of the market) are a little less buoyant than earlier in the Perth up-cycle, the focus is switching for affordable units. Perth started this boom with a reputation as the most affordable capital city housing market. After a couple of years of stellar price growth, that’s no longer the case. Perth is now well above Hobart and Darwin with its median house price and challenging Adelaide.  Perth now has a median house price of around $800,000, but its median unit price is in the low $500,000s, still well below that of Hobart and Adelaide.  When the bargain suburbs have house medians above $500,000, the big attraction that caused the stampede starts to fade. So now buyers in Perth, increasingly, are looking at unit markets, which are less competitive than the house markets. So now units are capturing a growing market-share in Perth, similar to the scenarios in Sydney, Melbourne, Brisbane and Canberra. And units are out-performing. In the new Spring edition of the Price Predictor Index, 29% of Perth house markets are3 classified as rising but almost 50% of unit markets are ranked as rising, based on trends with sales activity. Clearing, the trend with more and more buyers opting for attached dwellings over detached houses, is gathering momentum. It’s a major paradigm shift in Australian real estate – and at Hotspotting we believe this trend is here for the long term.  

Affordability is the most-debated and the most confused issue in residential real estate. While the rental shortage and rising rents occupies the minds of many, the property issue that occupies the most space most often in news media and in the minds of Australian consumers is housing affordability. It has been this way for years, indeed for decades. And while the so-called Great Australian Dream is often declared dead, with young people doomed to a lifetime of renting, the evidence suggests otherwise. I recently finished working on a report with financial comparison website Canstar which demonstrates that the Dream is very much alive. The Deposit Stars report shows that there are attainable options for young buyers in all our city and regional markets, including the biggest and most expensive cities. And the finance data indicates our property markets remain as active as ever.  A report from the Housing Industry Association in August 2024 noted that “various segments of the housing market are increasingly active, with lending to first-home buyers, owner occupiers, and investors increasing in the first half of 2024”, based on the latest ABS lending data. HIA economist Maurice Tapang said: “This increase in lending is partially driven by first home buyers. The number of loans issued to FHBs in the June quarter was 5.8% higher than the March quarter.” This reflects ABS data on the broader market encompassing all types of residential real estate loans up to the end of June 2024. One of the reasons home ownership is often declared beyond the reach of the average consumer is that most reports are based on unrealistic parameters.  As I comment in the Deposit Stars report, most analysis on affordability is based on the size of a 20% deposit to buy a house at the median price in our major cities and how long it would take to save such a deposit. These reports preclude the possibility of smaller deposits, particularly with the help of government programs.  They overlook the reality that most people entering the market for the first time buy houses in the lower price ranges well below the city’s median price. And they usually ignore the preference of many buyers for attached dwellings – apartments, townhouses and units - and not only because they’re cheaper. Many of the locations featured in the Canstar report reflect a growing phenomenon in Australian real estate: the rise of attached dwellings as the home of choice by more and more buyers. A range of cohorts are opting increasingly for units and townhouses, including downsizers, lifestyle buyers, migrants and first-home buyers. One of the features that draws growing numbers to apartments is location appeal. Not only do attached dwellings allow people to access property in good locations at cheaper prices than houses, but the average unit is better located than the average house. The “Measuring Home Price Differences” report by Infrastructure Victoria found that units consistently trump houses on proximity to desirable features.  The report says: “Units are located closer to selected infrastructure types, on average, than houses and townhouses.” This is one of multiple factors driving higher demand for units – challenging the dominant paradigm of real estate (that houses always outperform units and townhouses on capital growth). That is undoubtedly changing. Recently Ubank, which is a division of National Australia Bank, published a survey which found more than half of Gen Z and Millennials who don’t own a home are looking to make a move on the property market within the next five years. 56 per cent of survey respondents – all Australian Gen Z and Millennials between the ages of 18 to 43 – aim to purchase their first property within the next five years. Nine out of 10 respondents agrees that purchasing a home was one of their goals in life – although most acknowledged it won’t be easy. In addition to all that, research from the Commonwealth Bank confirms that ownership remains an ambition and that the number of first-time buyers going it alone is growing. According to data from the big four bank, 40 per cent of first home buyers purchased their property alone in the first six months of 2024 – without going in on the purchase with a partner, friend, or family member. That’s a jump from the 35 per cent of first-time buyers doing the same in 2019. So there is compelling evidence that home ownership not only remains a primary goal for young Australians, but that it is being achieved in growing numbers.  

In this episode of the Hotspotting Podcast, Tim Graham sits down with Arjun Paliwal, the Managing Director of Investorkit and a two-time REB Buyers Agency of the Year winner. Arjun shares insights on his unique approach to property investment, focusing on "buying against the grain."   Here are some of the key topics discussed:  Episode Highlights: Introduction to Arjun Paliwal: Arjun kicks off by talking about his journey in the property industry, how he scaled Investorkit, and the importance of innovation in finding investment hotspots. The Concept of 'Buying Against the Grain': Arjun explains what it means to buy against market trends, how it can lead to high returns, and why this strategy is not for the faint-hearted. Leveraging AI in Property Investment: Learn how Investorkit utilizes over $500k annually in AI technology to identify growth opportunities in the property market. Challenges and Successes: Arjun shares stories of both successful investments and the challenges faced when buying against the market tide. Practical Advice for Investors: For those interested in adopting this strategy, Arjun offers practical advice on how to get started and what to look out for. The Future of Property Investment: Arjun and Tim discuss the future of the property market in Australia, with insights into emerging trends and what investors should be prepared for. To Connect with Arjun & his team, please visit www.investorkit.com.au

Australian real estate has been characterised by three different types of shortage which have put upward pressure on rents and prices. Those are the shortage of rental properties, the shortage of new dwellings under construction and the shortage of homes listed for sale. While the shortage of rental homes and the under-supply of new homes persists, there has been recent improvement in the number of homes listed for sale by vendors. SQM Research finds that the number of residential property listings nationwide rose by 8% in August, bringing the total to almost 250,000 properties, up from 231,000 recorded in July. In annual terms, listings of homes for sale are now 11% higher than a year.  Nationally, new listings recorded a 12% surge in August, with over 73,000 fresh property listings entering the market. Sydney new listings were the highest level ever recorded for the month of August, according to SQM. It reports that total listings of homes for sale in August recorded significant increases across most major cities. Even boom cities like Perth, Brisbane and Adelaide recorded major increases in the number of properties for sale. Indeed, Perth had an 11% monthly increase in listings, reaching over 13,000 properties for sale – BUT Perth remains the only city with a significant yearly decrease, still 21% below August last year. Canberra up 11% and Adelaide up 9% both showed solid monthly growth in listings – and Canberra experienced the largest yearly increase of all major cities at 32%. Brisbane reported a moderate monthly increase of 7% in August, bringing the total to a little over 18,000 listings – which is 3.3% higher than a year ago. These improvements in listings of homes for sale – which may be inspired by the belief that Spring is a good time to sell – may take some of the pressure off dwelling prices, particularly if the rise in action by vendors continues in September and October.

State governments across Australia have no meaningful policies for easing the chronic under-supply of rental properties – but they do have a talent for using the rental shortage as an excuse to raise extra revenue from the housing market. One of the primary tactics they use is to scapegoat a section of the community and blame them for the problem that they, the politicians, have created – and then hit the demonised group with new taxes and pretend that they’re doing it to deal with the rental shortage. The worst offender in this regard, although not the only one, is the State Government in Victoria. Victoria, which has the highest property taxes in the nation, is by far the worst place in Australia to own an investment property – and the State Government there continues to work hard to confirm that reputation. Its latest move is to blame the rental shortage on property owners who use short-term letting platforms like Airbnb, rather than have permanent tenants. Choosing to use short-term letting is a perfectly reasonable and legal thing to do – and there is considerable public demand for houses and apartments made available for holiday letting, as an alternative to expensive hotel rooms. But the Victoria Government has decided to demonise owners to use Airbnb and other similar platforms so that they can hit them with a major new tax and raise some desperately needed revenue for a government that is strapped for cash. They’re claiming it will fix the rental shortage, but of course it won’t. Airbnb didn’t cause the rental shortage in Victoria or elsewhere in Australia – it’s a very minor part of a much larger problem, and curtailing it won’t create higher vacancies and lower rents for permanent tenants. This has been confirmed by a number of university studies, including one by the University of Queensland which found that banning short-term letting would not make any significant difference to the rental shortage. And RMIT University in Melbourne has come up with a similar finding. An RMIT University expert says the Victorian short stay rental reforms won’t solve the rental housing crisis. Dr Liam Davies, an urban planning expert from RMIT’s Centre for Urban Research, says the new powers granted to Victorian councils and owners corporations to restrict or ban short stay rentals are UNLIKELY to have a significant impact on the state’s housing crisis. Dr Davies said the reforms will likely have minimal effect on overall rental affordability. He says: “This change to short stay accommodation is likely to have positive benefits at a local level but may not significantly impact the state’s rental affordability issues.”  Dr Davies cautioned against expecting widespread changes to the rental market as a result of these policies. He said it’s unlikely that all those Airbnb dwellings would be shifted to long-term rentals – so the effect of the reform will probably be minimal. The most likely response of property owners faced with these new restrictions will be to sell – as many investor owners of Victorian properties have already done recently – thereby making the property shortage worse.  

CoreLogic is one of Australia's leading sources of data on residential real estate matters, although increasingly overshadowed by other, smarter data organisations like PropTrack. CoreLogic has lots of statistics about housing markets but when it comes to analysis and commentary, CoreLogic is very often a source of illogic. Their problem, like so many companies that comment on Australian housing markets, is that they employ economists to analyse real estate and the outcome very often is kindergarten analysis. Here’s a recent example: According to CoreLogic’s Regional Market Update, property markets outside the capital cities are experiencing a slowdown in value growth because, they say, fewer people are moving from the cities to the regions and because of the elevated interest rate environment. Regional markets saw dwelling values increase by 1.3% over the three months to July. CoreLogic economist, Kaytlin Ezzy, said this means the pace of growth has eased from recent peaks. She noted, however, that growth trends across Australia’s 50 largest regional markets have become increasingly diverse, including 11 regions which saw values rise by more than 3% in the quarter. So here’s what wrong with that analysis, for want of a better word. Firstly, they have made the common error of placing great significance on short-term data. The rate of price growth, overall on average across regional Australia, is less than it was a few months earlier, apparently, therefore they say that the market is declining.  But price graphs are seldom smooth and future months may see a return to higher price rises. It’s always unwise to declare a new trend based on one recent set of short-term figures. Secondly, they claim internal migration to the regions is no longer happening as strongly as before. The latest Regional Movers Index, jointly published by the Commonwealth Bank and the Regional Australia Institute, strongly disagrees with that statement. It shows that Australians continue to relocate from Sydney and Melbourne to regional areas in large numbers. Thirdly, the claim that elevated interest rates are causing a decline is farcically stupid. The RBA started lifting the official interest rate in May 2022 and it rose steadily (by a total of four percentage points) until November 2023. So interest rates have been elevated for over two years – and there has been no further rise in the past nine months – but now, according to Core Illogic, elevated interest rates are causing a decline in regional property markets. And how does that theory sit alongside the reality that, according to Core Illogic, 11 regions recorded a rise of more than 3% in the latest quarter? They say that “if you torture statistics enough, they’ll tell you anything you want to hear”. That’s particularly true for economists who subscribe to the theory that everything that happens in residential real estate is caused by interest rate trends, notwithstanding lots of compelling evidence to the contrary. The truth is that we still have a situation where many of Australia’s strongest property markets for price growth are in the regional areas, headed by boom regional centres like Bunbury, Mandurah and Geraldton in Western Australia, and Rockhampton, Toowoomba and Townsville in Queensland. Regional Australia continues to provide the best options for investors seeking affordable prices, higher rental yields and good prospects for capital growth, provided you choose your location with care.  

Perth is moving into a new phase in its property boom, with more and more buyers opting for units as houses become more and more expensive. The latest sales data shows that the strongest markets in Perth are well-located locations with a major presence of attached dwellings. While the most popular house markets for home buyers and investors (mostly those at the affordable end of the market) are a little less buoyant than earlier in the Perth up-cycle, the focus is switching to affordable units. Perth started this boom with a reputation as the most affordable capital city housing market. After a couple of years of stellar price growth, that’s no longer the case. Perth is now well above Hobart and Darwin with its median house price and challenging Adelaide. Perth now has a median house price around $800,000, but its median unit price is in the low $500,000s, still well below that of Hobart and Adelaide. The evaporation of affordability in the Perth housing market can be seen is the rise in values in selected suburbs. Armadale, heavily targeted by investors and FHBs, had a median price of $250,000 three years ago and now it’s approaching $500,000. Seaside Rockingham had a median price below $400,000 at the start of 2021 and now its $630,000. Greater Perth has many similar examples. When the bargain suburbs have medians above $500,000, the big attraction that caused the stampede starts to fade. So now buyers in Perth, increasingly, are looking at unit markets. While many house markets have been frenzied, with listings selling within days and prices rising by 20% or more a year, the unit markets are less competitive and prices have not yet taken off. The City of Perth provides a case study. The median unit price for East Perth has risen 6% in the past 12 months while the suburb of Perth has increased 9%. Typical units are priced in the mid-$400,000s. Quarterly sales have been 406 490 599, showing a major lift in buyer demand recently. In the City of South Perth, unit sales in both Como and South Perth are rising strongly, while in Subiaco quarterly unit sales have been trending higher for the past 12 months – the median unit price is heading towards $600,000, but that’s a third of the price of typical Subiaco houses. There’s a similar pattern in Victoria Park, where the median unit price has risen 11% but remains low at $400,000. Upmarket Mosman Park provides a startling contrast between its house and unit markets: there have been identical sales numbers in the past year, but the median prices are $2 million for houses and $380,000 for units. Perhaps not surprisingly, sales volumes for units are rising strongly, but prices haven’t moved much as yet. There are many other examples in the Perth market, which is now following patterns seen in other cities in the trend we call the Rise and Rise of Apartments.  

Adelaide’s property market, one of the nation’s strongest in the past two years, has strengthened further recently.  ales volumes shows that market activity in the June quarter was the highest for Greater Adelaide since mid-2022. The June Quarter sales levels represented a 25% increase on the March Quarter and were 10% higher than the same time last year. This is despite the reality that listings of homes for sale across Adelaide are the lowest at any time in the past 15 years, according to SQM Research figures. This continues Adelaide’s track record as a market with consistently high performance and helps to explain why it has been a challenger to Perth as the market with the highest price growth in the past two years. Adelaide’s median house price rose 15% in the 12 months to August 2024, while the median unit price increased 12%, according to PropTrack data.  Only Perth has recorded higher annual price growth. Across the Greater Adelaide market, suburbs with positive trends with sales activity outnumber those with negative ones by a factor of three to one. The Greater Adelaide area has standout markets across all price ranges, including affordable municipalities like Playford and Salisbury, middle market areas including Marion and West Torrens, and more upmarket locations such as the Unley, Holdfast Bay and Charles Sturt LGAs. The Playford LGA, which contains Adelaide’s cheapest suburbs, is the most popular precinct for buyers, with over 800 dwelling sales in the June Quarter. That was 31% higher than the same time last year – and a 53% increase on the March Quarter.  Most Playford suburbs have positive sales trends, either rising or consistent, with Blakeview and Davoren Park in particular standing out for their consistent buyer demand. The median house price for Blakeview has risen 16% to $550,000 in the past 12 months, while Davoren Park is up 33% to $440,000. Davoren Park had a median house price of just $175,000 three years ago. The neighbouring Salisbury LGA, another precinct targeted for its affordable homes, is also a strong performer with sales levels considerably higher than the March Quarter and also the same time in 2023. Rising markets in the City of Salisbury are headed by standout suburbs like Ingle Farm and Mawson Lakes. The median house price for Ingle Farm was $380,000 three years ago and is now $655,000, after 19% growth in the past 12 months. Another outer-ring location with outstanding numbers is the Mount Barker LGA, which has recorded the highest quarterly sales numbers in more than three years. The suburbs with strongly rising sales activity include Nairne and Mount Barker. Nairne’s median house price has risen 17% to $750,000 in the past 12 months. Among the middle market areas, the West Torrens LGA is a notable performer with a significant increase in sales activity in the June Quarter – the highest levels since late in 2021. There are no suburbs with negative trends in West Torrens, while rising markets are headed by Underdale, Torrensville, Plympton and Fulham. The Port-Adelaide Enfield LGA has numerous suburbs with positive ratings, with sales activity overall much higher in the June Quarter compared to the March Quarter and the same time last year. Notable rising markets include Lightsview and Blair Athol. The City of Marion has recorded its highest quarterly sales numbers since mid-2022 in a market dominated by suburbs with positive sales trends, including rising suburbs Warradale, Hallett Cove and Edwardstown. The median house price for Hallett Cove has risen from $470,000 to $800,000 in the past four years. Some of Adelaide’s more upmarket precincts are also travelling well. Ten of the suburbs in the Charles Sturt LGA are ranked as rising markets, headed by Flinders Park, Findon and Bowden. Sales activity has been rising steadily in the Holdfast Bay municipality in the past four quarters. A standout feature is that the unit markets in both Glenelg and Glenelg North are classified as rising markets in our latest analysis. The upmarket City of Unley has a particularly strong June Quarter, with sales numbers up almost 50% on the March Quarter. Rising suburbs include Parkside (median house price $1.3 million), Clarence Park ($1.27 million) and Myrtle Bank ($1.6 million). The overall conclusion is that the Adelaide market continues to pump strongly and is likely to be a national market leader on price growth for the foreseeable future.

One of the greatest misconceptions in the housing market is that property investors are the people who cause property prices to rise. The evidence confirms that this is a major piece of misinformation but some sections of politics and news media love to perpetuate this fiction. And, as an extension, use it as justification for advocating the end to negative gearing. Some people appear to believe that eliminating negative gearing tax benefits will fix all the problems in the property market: rising prices, housing affordability generally, the shortage of new homes, the rental crisis, pretty much everything. And, like so much of the debate about housing issues, it’s patently false and nothing more than an expression of the politics of envy. So let’s look at the reality of who has influence in our housing markets and in particular in causing prices to rise over time. My view over time, supported by the research evidence, is that the largest and most powerful cohort in the residential real estate industry comprises home buyers other than first-home buyers – i.e. owner-occupiers buying their next home, whether up-grading or downsizing. They are the largest group of buyers numerically, they have the greatest market share and they have the greatest borrowing capacity and ability to pay higher prices than any other group in the market – they’re older, have higher incomes, have equity in their existing homes, they’re aspirational and they have borrowing capacity, far more so than first-home buyers or the average investor. The latest edition of the NAB Residential Property Survey tends to confirm that view. The report states that buying activity in the established property market is, and I quote, “dominated by owner-occupiers net of FHBs” – which means home buyers other than first-home buyers. The NAB report says they comprise 44% of buyers in the Australian housing market and comments: “These buyers account for the lion’s share of established home sales in all states.” The next biggest buyer cohort is first-home buyers, who comprise 34% of buyers in the market. Australian investors are just 18% of buyers and foreign investors around 4%. So the people constantly blamed for prices rising and causing poor housing affordability, Australian property investors, have a market share of just 18%. More than three-quarters of buyers out there in the market are home-buyers – and they have massive advantages over investor buyers. They have lower interest rates, they have lower levels of stamp duty, they have lower council rates and lower rates of insurance, and they don’t have to pay land tax or capital gains tax. If they’re first-home buyers they also receive government grants and other assistance measures, including stamp duty concessions. The only advantage that property investors can access is negative gearing, which around half of property investors can use to reduce their tax. The research shows that the typical property investor is young, on an income below $100,000 and restricted on what they can pay by their borrowing capacity, which is less than a home buyer on the same income because the investor has to pay higher interest rates and stamp duty. What many politicians and journalists want us to believe is that a cohort which is just 18% of the buyers in the market and restricted in their borrowing capacity by numerous factors somehow overpowers the 78% of buyers who are owner-occupiers - and therefore, apparently single-handedly cause house prices to rise. It simply isn’t so. The myth of the advantaged and privileged property investor is the greatest lie in real estate.  

The trend we call the Exodus to Affordable Lifestyle is among the most powerful forces impacting real estate markets across Australia. It’s a trend that been around for at least the past 10 years, with more and more residents of the biggest cities relocating to smaller cities or regional areas in search of a different and more affordable lifestyle, empowered by technology which allows many people to work remotely. It was NOT created by the Covid lockdowns. It was under way long before Covid appeared in 2020 and it continues to have considerable momentum now that we are well beyond the pandemic restrictions. But media continues to perpetuate the fiction that this was a Covid thing – and to express surprise that, now that we no longer have lockdowns and border restrictions, people are not all moving back to the big cities. The latest quarterly edition of the Regional Movers Index confirms that this trend is as strong as ever – and it has generated more shock/horror/amazement from journalists who think it was all about the Covid lockdowns. One article in major media expressed surprise that “Australia is not going back to the pre-pandemic way of life”. And there’s a very good reason for that: this trend has very little to do with the pandemic. The Regional Movers Index – which is a collaboration between the Regional Australia Institute (RAI) and the Commonwealth Bank - has once again reported that there are far more people relocating to regional areas than making a move in the opposite direction to major cities, with a 27 per cent difference in the June 2024 Quarter. What the latest figures confirm, according to RAI chief executive Liz Ritchie, is that “the population movement we’re seeing is a sustained trend”. Ritchie says: “Regional Australia has become the nation’s new frontier.” The latest data highlighted a number of specific hotspots that are reaping the benefits of Australia’s romance with the regions. Lake Macquarie, which sits beside Newcastle in NSW, has emerged as one of Australia’s most popular destinations for movers, securing an almost 5 per cent share of net internal migration over the past year. Neighbouring local government areas on the NSW south coast such as the Bega Valley and Eurobodalla both experienced strong annual and quarterly surges in movement, according to the report. Large centres within a few hours’ drive of capitals remain popular with many movers, however the regions that experienced the biggest population changes over the past 12 months were generally further afield, including Townsville (Qld), Mid-West Regional (NSW), Strathbogie (Vic), Murray Bridge (SA), Greater Geraldton (WA) and George Town (Tas). Approximately three-quarters of the city dwellers who made the move to the regions in the past three months found new homes in either regional NSW or Victoria, confirming that Sydney continues to shed the highest number of residents, followed by Melbourne. But that’s not to say that Queensland’s appeal has waned entirely, with regional Queensland’s share of net city outflows sitting at 19 per cent, even though it was as high as 41 per cent this time last year. Indeed, the Sunshine Coast has retained its title as the nation’s most popular destination for relocators, accounting for a 14 per cent share of net internal migration. The Gold Coast has slipped down in the rankings, however, with the city experiencing a net outflow of people to other regional areas. Western Australia also proved attractive for relocators, with Albany, Bunbury, Busselton, Capel and Northam all seeing an inflow of new residents. The overall picture is that the trend of people moving from Sydney and Melbourne to regional areas continues strongly, with large numbers of big city dwellers still seeking a different and more affordable lifestyle.

Top economists are unanimous in believing Australia's housing market is in crisis, according to a new poll. And I have to say, Wow, we had to go to a group of “top economists” to achieve that startling revelation. It comes from a survey in which the Economic Society of Australia offered these top economists a choice of 14 measures identified by as likely to restrain prices for buyers and renters – in other prevent property prices and rents from continuing to rise. Therein lies the first problem: they polled economists rather than real estate experts. If there’s one thing we’ve learnt in the past four or five years of observing real estate analysis and commentary is that economists, generally and collectively, have a very poor understanding of real estate markets, which is why they are so incredibly bad at predicting outcomes. But, ignoring that reality, the survey asked 49 people described as “leading economists” to respond to this question: "Here is a list of measures governments could take to increase housing affordability (to reduce the cost of purchasing or renting relative to wages). Which would you most support? Pick up to three." Among them, apparently, are former heads of government agencies, a former Reserve Bank board member, and former Treasury, International Monetary Fund and Organisation for Economic Co-operation and Development officials. Sadly, but rather typically, the poll didn’t include any property experts. Just a group of individuals who have typically occupied ivory towers a long way from the coal face of property markets. And here’s the next problem with this process: the tick-box options presented to the leading economists did NOT include the only measure likely to ease the rental shortage and therefore restrain rental increases – providing incentives for people to become landlords. You have to wonder why not. So, whoever designed the poll – yes, a group of economists – failed to understand the problems they were exploring. Of the options the panel of non-experts were given to choose from, two-thirds of them picked "ease planning restrictions" as most important fix. Almost as many picked "provide more public housing". So, most believe that creating more dwellings will fix everything. Which, again, shows a fundamental lack of understanding of the problems, how they were created and where the solutions lie. But it gets worse. About one-third wanted to "tighten negative gearing and capital gains tax concessions". You have to wonder about the thought process here. How does causing a major deterioration in the financial position of the people who provide the homes tenants occupy cause rents to fall? And given that investors are less than 20% of the buyers competing in the market, how does this stop prices from rising. Surely you would have to introduce measures to curtail home buyers, who comprise almost 80% of buyers competing in the market, if you wanted to stop prices from rising. Back to the survey: about a third of the respondents wanted to "replace stamp duty with land tax applying to family homes". Okay, so that’s a measure that might slow down home buyers a little. Also popular were removing barriers to building prefabricated homes (31 per cent), fast-tracking the training of h ome builders (18 per cent) and fast-tracking the immigration of home builders (14 per cent). Again, all are measures to increase housing supply and this appears to assume that building more dwellings will stop prices and rents from rising. Ten per cent of those surveyed wanted to include the family home in the age pension assets test, 8 per cent wanted to remove first homeowner grants and concessions, and 6 per cent wanted to apply capital gains tax to family homes. So, those measures at least at targeted on home buyers and appear to recognise their part in causing prices to rise, but these were the least popular of the tick-box choices. The most popular were all measures which assume that building more homes and curtailing property investors will fix all problems. But doesn’t explain how clamping down on the providers of rental homes will cause rents to fall – or stop prices from rising  

A question I get asked more than any other is where I see the Australian property market heading in the next 12 months OR what I expect to happen with Australian property prices this year or next year. And the answer I provide is usually delivered in multiple parts. Firstly, there is NO Australian property market. Although economists and journalists often refer to “the Australian property market” and predict what will happen with “Australian property prices”, the reality is that there is no such entity as the Australian property market. Secondly, what I expect to happen with prices depends on where, because we have so many different markets across the nation. Thirdly, real estate is local in nature and the market activity and the price movements depend on the local economy which underpins the location’s property market. Take a look at the price growth results among the eight capital cities for the past year and you will note that some have had boom growth, some moderate growth, some have stagnated and a few have had falling prices.  All those different scenarios occurred within just the eight capital cities. There were similar variations occurring throughout all the regional markets. All those places sat within the same national economy, all had the same situation with interest rates and all were operating under the one Federal Government. Why, then, did we have all those different outcomes?  And the answer is: Because real estate markets are very LOCAL in nature. The greatest influence on them is the local economy. So, if you want to understand a particular property market, first you need to understand everything that’s happening there in terms of the various local industry sectors, the infrastructure and other developments that are under way or in planning, and what’s happening with local jobs creation. Once you can understand whether the location’s economy is weak or strong, growing or stagnant or contracting, then you can begin to determine what might happen with property prices. For that reason, at Hotspotting we are always keenly interested in a quarterly report published by CommSec, called the State of the States report. This report uses a series of different metrics to rank the eight state and territory economies. And I have found, over many years, that there is a correlation between the strength of the state or territory economies and the performance of the capital city property markets. The past three quarterly editions of the State of The States report have ranked South Australia as the No.1 ranked economy in the nation, a finding that would surprise many people. But it doesn’t surprise the team at Hotspotting because we are very aware that the economy of Adelaide and South Australia is pumping strongly, helped by its status as the high tech innovation capital of the nation and the leading state for alternative energy developments. It also has a big education sector, a major military economy and a lot more. Coinciding with the rise and rise of the South Australian economy has been the rise and rise of the Adelaide property market. In 2023, Adelaide was the No.1 or the No.2 market in Australia for house price growth (depending on whose statistics you believe), in competition with Perth. PropTrack’s data showing the leading suburbs and towns in Australia for price growth in the four years since Covid arrived, finds that the top 5 suburbs in the nation for price growth performance were ALL affordable suburbs in Adelaide. In the latest edition of The State of the States, the No.2 ranked economy was (again) Western Australia - and again, there’s a clear correlation between that reality and the performance of Perth as one of the leading boom property markets in the nation. Melbourne and Victoria now rank No.3 on economic performance and this is one of several reasons why we believe that this market is poised for price growth in the next 12 months and beyond, coupled also with very strong population data and a significant program of big infrastructure projects. Consistently at the bottom of the CommSec report rankings is the Northern Territory – and it does not surprise us that Darwin has the weakest house price performance of all the capital cities in the past 12 months. Other economies with lukewarm economic performance are Tasmania and the ACT – and this corresponds with the poor price performance of the Hobart and Canberra housing markets in the past year. So this report, freely available to anyone who is interested, is one that’s worth following – because, read in conjunction with other data, it can provide clues about where prices are likely to rise in the near future.  

Contemplate this scenario: you buy a capital city house for $380,000 and a year later it has a market value of $530,000. Up 40% in 12 months, providing a capital gain of $150,000. Or this one: you paid just $240,000 for a house in a regional centre and a year later it’s worth $325,000 – up 35% in 12 months. And you’re getting a rental return above 7%. A third example is paying $380,000 for a house in a capital city and watching it grow to $480,000 in 12 months. Meanwhile, rents have grown 25% in your suburb, underpinned by a vacancy rate of 0.4%, and your rental return has increased from around 6% initially to well above 7% a year later. These are some of the scenarios to emerge from our analysis of the 50 locations in the special report, The Pulse, published quarterly by Hotspotting in conjunction with depreciation experts Washington Brown. That 40% capital growth scenario has occurred in the Perth suburb of Hillman, which has benefited from the extraordinary price increases experienced in the Western Australian capital in the past 12 months. The 35% leap in values happened in the little-known NSW regional town of Moree, where values have been boosted by construction of Australia’s biggest national infrastructure project, the $35 billion Inland Rail Link which spans the three major eastern states. The third scenario relates to Elizabeth East in the northern suburbs of Adelaide, a precinct heavily targeted by first-home buyers and investors for its affordability, good amenities and proximity to major employment nodes. These and other outcomes in locations featured in our report in the past year demonstrate one of the fundamental philosophies that underpins our recommendations to investors:  Contrary to a popular real estate theory, you don’t need to choose between capital growth and high rental yields. If you select your location well, you can benefit from both. The 50 locations featured in The Pulse report are chosen because they offer above-average rental yields – but we also require our nominated locations to have the credentials for capital growth. Of the 50 locations in the current edition of the report, 48 have recorded growth in their median prices in the past 12 months – including 30 with capital growth above 10%. The top 10 have all had price rises well above 20% - in addition to providing superior rental yields. But the truly outstanding markets are the ones with exceptional growth in both prices AND rents. Consider these examples. Firstly, Armadale in WA. Before Perth’s boom convinced investors that any house in Perth was a good buy, few people wanted to buy in downmarket Armadale. Now it’s flavour of the year for those seeking a cheap house with high growth prospects. The data for the past year is extraordinary, with the median price up 35% and rents up 28%. The median is now $460,000 but you can still get 6% yields. Then, there’s Carey Park, WA: This affordable suburb in the key regional city of Bunbury has become a sought-after location for investors seeking low entry prices and high rental yields. Those who followed our advice and bought there a year ago would be happy: the median house price has jumped 22% and rents are up 23%. The median price is still under $400,000 and rental yields remain around 7%. What about Murray Bridge, SA: Regional South Australia seldom features in the national discussion about real estate growth but it has excelled in recent years, led by Murray Bridge, where both the median price and the median rent for houses have risen 20% in the past 12 months. Vacancies are ultra low at 0.4% and, despite the growth of the past few years, the median price remains within reach of most buyers at $430,000. And then there’s Woodridge, QLD: This is another unfashionable option which has nevertheless out-performed. Typical units in this southern Brisbane suburb now cost above $300,000 following annual median price growth of 24% - and, with rents also rising 16%, investors can find yields between 6% and 7%, with the vacancy rate around 1%. There are many other examples like these on our list of 50 key suburbs which we have listed for their superior rental yields AND potential for capital growth. And they’re all affordable places that should fit within the budgets of most investors.

Are you ready to take your superannuation to the next level? Join us for an exclusive webinar designed to help you leverage your superannuation for maximum wealth creation and tax efficiency. Super Strategies – Building Wealth and Reducing Tax for Investors In this insightful session, we’ll cover: 📖 Actionable strategies to grow your super 💰 Techniques to reduce your tax load 🏠 Methods to harmonise your super with other investments Whether you're a seasoned investor or just starting out, this webinar will provide you with the knowledge and tools to make the most of your superannuation and achieve your financial goals. Host: Tim Graham, General Manager of Hotspotting Special Guest: Sam Wakefield, Superannuation Expert from Optalife Don't miss this opportunity to supercharge your superannuation and secure your financial future. You can connect with Sam at www.optalife.com.au

  Episode Overview: In this insightful episode of the Hotspotting podcast, Tim Graham sits down with Ben Kingsley, the Chair of the Property Investors Council of Australia (PICA), to discuss the vital role that property investors play in shaping the future of Australia's real estate market. Ben provides an in-depth look at the importance of the PIPA Annual Investor Sentiment Survey and how it captures the pulse of the property investment community.   Key Discussion Points: Importance of the PIPA Survey: Ben highlights why the PIPA Annual Investor Sentiment Survey is a critical tool for understanding the mood, confidence, and key trends in the Australian property market. He explains how the survey data influences media and policymakers and why it’s crucial for all property investors to participate.  Advocacy through PICA: Tim and Ben delve into the advocacy work that PICA does on behalf of property investors. Ben shares how PICA ensures that investors' voices are heard in important policy discussions and how membership in PICA can help protect and advance investors' interests in the face of changing regulations.    Membership Benefits: Ben outlines the many benefits of joining PICA, from staying informed about the latest changes in property law to networking with other like-minded investors. He also discusses how PICA members can access exclusive resources and support to enhance their investment journey. Current Market Challenges: The conversation also touches on the current challenges facing property investors, including new rental regulations and tax laws. Ben offers practical advice on how PICA membership can help navigate these complexities and safeguard investments. Why You Should Listen: Whether you're a seasoned property investor or just starting out, this episode is packed with valuable insights that will help you better understand the landscape of property investment in Australia. Learn how your participation in the PIPA survey can make a difference, and discover how PICA can support your investment goals. Don’t miss out on the opportunity to have your say in the PIPA Annual Investor Sentiment Survey and consider joining PICA to ensure your voice is heard in the property investment community. Visit Hotspotting.com.au for more resources and insights. Complete the survey here: https://www.surveymonkey.com/survey-taken?sm=PXT61WAC1xL5N1S9IJePE1hAn4c6_2BrMhKsShimHkkmEzip1e9oEIwz8mVtE4BUS48EmEeTvIueOcJ2V9C91IGMteQ6VUOkZjAoyRp6M3rtZL2jIJEdiWCxXHtoDzsPg3MiLuyrYFEEQtWCQHMn_2F1xw_3D_3D Join Pica here: https://pica.asn.au/membership/why-join/

There are two opposing story lines circulating in news media about Australian real estate ownership. One story line, repeated regularly by media, is that the Great Australian Dream is dead and that young Australian adults can no longer afford to buy homes. The other one, revealed whenever the Australian Bureau of Statistics releases official data on real estate finance, tends to suggest that the dream is very much alive – and indeed thriving. In fact, the latest lending figures show major increases in buying activity by all types of real estate consumers, including first-home buyers. Media loves negative sensation about housing affordability and very often the truth is optional.  Some organisations who crave publicity to lift the profile of their businesses regularly feed this weakness in news media by creating bogus reports about Australian housing affordability. They do this, usually, by applying a set of parameters that are irrelevant and unrealistic. Here’s a typical example: a so-called research organisation will create a report which examines how long it takes a young couple to save a 20% deposit to buy a house at the median price in Sydney or Melbourne. Or how much a person needs to earn to achieve a loan for this. Now, there are multiple reasons why this is a nonsense designed to create a headline rather than inform the public. These reports are full of furphies. Furphy No.1 – you don’t need a 20% deposit. You can get into real estate ownership with a 10% deposit or even a 5% deposit. Furphy No.2 – first-home buyers don’t buy at the median price in Sydney or Melbourne or anywhere else. They buy in the lower price ranges. The city median is irrelevant to the circumstances of young buyers and the issue of affordability. Furphy No.3 – these reports always overlook attached dwellings as an option for buyers seeking affordability. In many capital city suburbs, the median price for units is half the median price for houses. But these bogus reports never speak about this viable, popular and more affordable option. Why are these so-called research reports full of irrelevant and misleading information? Because the goal is NOT to inform people, or help people, or improve the situation for the community. The goal is always self-serving and dishonest – to create free publicity by generating alarm in the community. And journalists are happy to recycle this nonsense as factual news. In Sydney, the median house price is close to $1.5 million (according to CoreLogic) but that is irrelevant to people seeking affordability in our most expensive capital city.  What is considerably MORE relevant is how much it costs to buy a unit in the Canterbury-Bankstown area of Sydney, where there are plenty of viable options in multiple suburbs in the price range from $400,000 to $600,000. Or what it costs to buy a house in more affordable parts of Greater Sydney, like the local government areas of Liverpool, Parramatta and Blacktown. And of course there is the reality that over 20 million Australians live in places other than Sydney and the median house price in our most expensive city is utterly irrelevant to them. How about some focus on what it costs to buy a house in the affordable northern suburbs of Adelaide, or an apartment in the inner-city Brisbane suburb of Bowen Hills, or in the inner-city Perth suburb of Belmont or a house in outer-ring areas of Greater Melbourne. And what about regional Australia, which is attracting growing numbers of new residents relocating from the biggest cities in search of a different lifestyle, empowered by technology that allows more and more people to work remotely. So, let me tell you, the home ownership dream is very much alive right across Australia. How can I be so sure? Because the official lending data confirms it. The latest stats from the ABS – which is for the month of June - shows we are currently seeing growing numbers of people buying homes as first-home buyers, other types of owner-occupier buyers and investors. Lending for the purchase of homes rose 19% in June, compared to a year earlier. In June lending to owner-occupier buyers was up 13% compared to a year earlier, with an even larger increase in loans to investors. There was also a rise in lending to first-home buyers, though not as large an increase. It should be fairly self-evident that lending levels would not be rising, including for first-home buyers, if it was true that no one can afford to buy any more. We have highly active property markets in most parts of Australia and buyers of all kinds are active. So, next time you see one of those shallow media headlines declaring that the dream is dead and that young Australians are priced out of the market, don’t believe it.  

The markets currently attracting our focus at Hotspotting are the ones we call “the second wind markets”. These are locations which experienced strong capital from 2020 to 2022, have been in the post-boom pause/correction phase for the past 18 months or so, and are now poised for another period of price growth. There are few better places to find second-wind markets than Regional Victoria, as many of the key centres have exhibited that pattern over the past 3-4 years and are now showing the early signs of revival. Many of the suburbs of Ballarat are classic examples. The median house price for Sebastopol rose from $330,000 in 2020 to $475,000 by the end of 2022. There has been a price correction in the past 18 months but market activity is rising again and another period of price growth is expected. Eaglehawk in Ballarat rose from $325,000 in mid-2020 to $520,000 in early 2023, before the price graph evened out over the following 12-18 months. Bendigo displays similar patterns. The suburb of California Gully had a median house price of $300,000 in 2020, rising to $465,000 late in 2022. The price graph has flatlined since then, before showing the first signs of new growth in mid-2024. Similarly, Flora Hill lifted its median house price from $255,000 in 2020 to $450,000 in early 2023 – but the price graph has been flat over the past 12 months. Now sales activity is rising again, which is a forward indicator of impending price growth. Other markets in Regional Victoria have this pattern, which is a common one in real estate cycles with a period of strong growth followed by a period of correction or no growth, before the market embarks on the next growth cycle. Shepparton, Traralgon, Mildura, Wodonga, Warrnambool and many other Victoria regional centres have this pattern. They’re all places with solid local economies and credentials for future growth. Most of them commonly have houses in the $400,000s and $500,000s, with low vacancy rates, so they present attractive features for property investors.  

You can be forgiven for being confused about the Melbourne market. On the one hand, news media is full of stories about investors shunning Australia’s largest city because of draconian taxes and policies by the nation’s worst state government. There are also frequent articles about the lack of price escalation in Melbourne markets, at a time when many other capital cities are delivering stellar capital growth. But this is balanced by the analysis from those who believe Melbourne to be a prime opportunity for buyers to get in early in a growth cycle, with the city’s markets poised for revival. A strong state economy, a big infrastructure program and some compelling population data support the view that Melbourne is overdue for a growth spurt. The first thing to understand is why Melbourne has underachieved in the past couple of years while others have excelled. The lingering impacts of the Covid period are considered at least partly responsible. Melbourne was locked down for longer than other Australian cities and was indeed dubbed by media as “the world’s most locked-down city”. There’s no doubt the attitudes and policies of Dictator Dan (Andrews) deterred many. And subsequent state policies unfriendly to investors – including the reality that Victoria has the highest stamp duty and the highest land tax in the nation – have deterred buyers from investing in Victoria. On the positive side, Melbourne is the nation’s biggest beneficiary of overseas migration, which made it a national leader on population growth last year. Australia experienced a record number of new additions to the national population in 2023, with 84% of it attributed to overseas migrants. So Melbourne, despite losing residents to internal migration (people moving to other parts of the nation), grew its population by almost 3% last year. Only Western Australia had higher growth. Victoria consistently ranks among the nation’s leading economies and ranked third in the July 2024 edition of the State of the States report by CommSec. The July report comments that Melbourne is consistently strong across all the metrics used to rank the states and territories, which include population growth, construction work, housing finance, retail spending and employment performance. A strong economy underpins the residential real estate market, because it means there is busy economic activity creating jobs, and from that springs demand for homes. A key factor keeping the Victorian economy vibrant is the big program of infrastructure development across Greater Melbourne. They include multi-billion-dollar developments now under construction like the Suburban Rail Loop, North East Link, Metro Tunnel and West Gate Tunnel – which combined are estimated to cost over $70 billion. Those projects alone – and there many others impacting the city – are likely to energise the local economy in ways likely to lead to growth in demand for homes. So there’s a plausible argument that now is an opportune time to be considering investment in Melbourne, rather than doing what many investors do, which is dive into markets when they read there’s a boom on. Far smarter to buy before the boom starts.

The trend we have termed “The Rise and Rise of Apartments” continues to pick up pace. Across Australia, more and more buyers are opting for attached dwellings for lifestyle, for affordability, for convenience and for safety. One of the features that draws growing numbers of buyers (and tenants) to apartments is location appeal. Not only do attached dwellings allow people to access property in good locations at cheaper prices than houses, but the average unit is better located than the average house. A report titled “Measuring Home Price Differences” by Infrastructure Victoria has found that units consistently trump houses on proximity to desirable features.  “Units are located closer to selected infrastructure types, on average, than houses and townhouses,” the report says. The report found that units were far more likely to be located close to train stations, tram stops, major activity centres and arterial roads than houses. “About 60% of units are within 1.6km of a tram stop, while this distance only includes about 20% of houses,” the report says. This is one of multiple factors driving higher demand for units – challenging the dominant paradigm of real estate. That paradigm, still widely accepted in the real estate industry, states that houses always outperform units and townhouses on capital growth. But that is undoubtedly changing. We are seeing growing evidence that more and more buyers of various sorts are opting for attached dwellings. Buyer demand in locations where units dominate the dwelling mix - or are a significant part of the dwelling mix - has been rising notably for the past 12-18 months. Suburbs where units prominent are now among the most powerful markets in Australia – which makes our Top 10 Apartment Hotspots report essential reading for investors seeking opportunities in 2024 and beyond. Those seeking out well-located and affordable apartments include older people downsizing from a large family home. They also include … young people seeking an affordable first step on the property ladder; lifestyle buyers seeking low-maintenance, lock-up-and-leave options in good locations; overseas migrants from countries where unit-style living is the norm; investors seeking affordability and higher rental yields in good locations; and buyers who seek the security and safety of an apartment above ground level. In inner-city precincts in our biggest cities, houses can typically cost over $2 million, but apartments can be bought in the $600,000s and $700,000s in the same suburbs in many cases. The rental yields are also significantly higher, a key consideration in times of higher interest rates – although it needs to be remembered that apartments do entail additional costs like body corporate fees. But the most noteworthy data relates to capital growth. In a growing number of locations throughout Australia, apartments have recorded larger increases in median prices than houses, both in the past year and over the longer term. At Surfers Paradise on the Gold Coast, apartments are considerably cheaper than houses, sell faster, have higher rental yields, have recorded bigger price growth in the past year – and the long-term capital growth rate also is superior. There are many, many more examples like this across Australia. New data from CoreLogic shows that apartment values are rising faster than those of houses in about six out of 10 suburbs. This is also reflected in the general results for many of our major cities. In the past three months, the median price for units in Brisbane rose 5.8 per cent, while houses increased 3.4 per cent. Adelaide units outperformed houses by the same margin after increasing by 7.1 per cent during the same period. Unit prices are also rising at a faster rate than houses across Sydney, Melbourne, Perth and Hobart, although they have fallen behind in Darwin and Canberra. Across the combined capital cities, unit values rose faster than house values in 506 suburbs out of a total of 855 suburbs, with some unit markets gaining more than seven times more than houses.

The official data shows that the cornerstone of the financial wellbeing of most Australian households is the family home. Over two-thirds of the household wealth in this country is residential property and, for most of them, this means their home - as most people don’t own investment properties. The family home is the foundation of the financial security of most people and its value underpins people’s lives and their sense of security - and, in particular, their retirement. The good news is that household wealth nationally grew 10% in the past year and 68% of that wealth resides in the residence. The bad news is that if the Greens have their way, all of that will be decimated. Their policy for real estate is to force the value of your home to fall - a lot. And if you’re performing one of society’s most important functions, providing a home for others to live in as tenants, the Greens want you to be rubbed out. Not just curtailed, but eliminated. Now, we’ve known for some time that the Greens are anti real estate and, in particular, hostile towards anyone who owns an investment property, even though these are the people who provide 91% of the homes that tenants occupy in Australia - and they’re in extreme short supply. If the Greens have their way, ownership of investment properties will cease to exist in Australia - although, at the same time, they have no policy about who will provide the 3.2 million rental homes that investors currently provide. But it gets worse, because the Greens plan is to force down the value of everyone’s home. They apparently believe that this is how you deal with the issue of housing affordability. One thing that is abundantly clear is, rather tragically, that no one in the Greens has any understanding of Australian property markets. They have no comprehension of how the cost of housing became so high, no clue as to how rental properties became so scarce, no understanding of why prices rise and no sensitivity to how important the value of the family home is in the life of the nation. Because everything they propose to do, if they ever gained power, would make all of these issues infinitely worse and would decimate the structure of one of society’s most fundamental needs, shelter. Observing the Greens espouse economic and real estate policy is like watching primary school kids talk about stuff they think is cool. Imagine if you could have anything you wanted and it doesn’t matter how much it costs and whether it’s really possible or not. The Greens apparently don’t consider it necessary to cost their policies or to consider the consequences of their pixie-eyed plans. Just one example: in the election campaign of local government in Queensland earlier this year, a key policy plank was fast rail connecting Brisbane, the Gold Coast, Toowoomba and the Sunshine Coast. There were no costings and no funding proposals for a plan, if you can call it that, which would cost many tens of billions of dollars.  They also said they would build hundreds of affordable homes on the site for the Eagle Farm race course In Brisbane and it would all cost no more than $40 million, glossing nonchalantly over the fact that the race course land has an owner not keen to cease operations, and that land alone is worth hundreds of millions of dollars, never mind the cost of construction of hundreds of homes. But returning to their policy of smashing the value of family homes. Imagine if you’re a young couple who saved a 10% deposit and bought a first home for $600,000 and you have a mortgage of around $550,000. If the Greens had their way, your new home would be worth less than the size of your mortgage. You would be in a position of negative equity and you would be in an extremely vulnerable position. Your bank would be highly concerned and everything you have worked, saved and sacrificed for would be at risk. Now multiply that by millions of other households and you have a financial, economic and personal disaster of galactic proportions. And that’s apparently what the Greens want for Australia. Two-thirds of Australian families own their homes and most would be alarmed at the scenario that the Greens think is fair, reasonable and desirable. But even more fanciful than the Greens’ objective of destroying the value of our homes is the means by which they say they’ll achieve it. Their stated plan is to scrap negative gearing and increase capital gains tax. This apparently, miraculously, will cause the collapse of property values in Australia. The Greens believe that the owners of investment properties in Australia are a criminal class and the source of all evil in the housing market. Smashing investors will fix everything, apparently, including housing affordability, the rental shortage and the ongoing increase in rents. No one cares what happens to investors, in the Greens’ mindset, because they’re all rich bastards who own 15 or 20 properties and earn millions of dollars a year - right? Well, no. Here’s the reality. The typical investor is a young Australian who earns less than $100,000 a year and owns just one property or is buying their first. They’re not wealthy, they’re not inherently evil and because they cannot afford to spend big, they’re buying at the lower end of the market and are limited in how much they can spend on a property. They comprise perhaps 30% of buyers in the market. The other 70% are home buyers and the largest and wealthiest cohort in the market are home buyers other than first-home buyers. They own their existing home, they have equity, they’re older with higher incomes, they can borrow more than first-home buyers and typical investors, and they’re aspirational. They’re the ones most likely to be pushing up dwelling values. Investors are limited in their borrowing capacity and seriously disadvantaged in the market, because they have to pay higher interest rates, higher stamp duty, higher insurance, higher council rates - plus they have to pay taxes that home buyers don’t have to pay, like land tax and capital gains tax. The Greens say they are privileged and advantaged – but clearly the opposite is true. Australia scrapped negative gearing in the 1980s and it didn’t stop prices from rising. But it did create a rental shortage, so a couple of years later the then Labor Government reinstated negative gearing.  New Zealand scrapped negative gearing in 2021 and dwelling prices kept rising. It was only later, when interest rates went extremely high, much higher than Australia, that NZ prices stopped rising. But it did make rental properties scarce so New Zealand is now in the process of bringing back negative gearing. But do the Greens care about any of that? The answer is that the Greens don’t know any of that because they don’t bother themselves with annoying things like knowledge or research. They’re the spoiled brats of Australian politics and, if they have their way, you’re going to lose a big chunk of your wealth. Be afraid, be very afraid.