Episodes
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We’re constantly asked at Hotspotting whether it’s better to invest in the regions or the capital cities – and whether you get higher capital growth in the outer-ring suburbs of our cities or the so-called prime inner-city locations.
Now, there’s no definitive answer to questions like that, because there are so many different scenarios to consider – and, at the end of the day, it comes down to the performance of individual local markets and you simply cannot generalise.
But, based on the evidence of where the highest capital growth has occurred in the past four years, I would have to say the best performers have been found in regional areas and the outer-ring precincts of capital cities – NOT including Sydney or Melbourne.
PropTrack, which is Hotspotting’s preferred source of property data, has analysed capital growth since March 2020 – which is when the Covid lockdowns started to happen.It shows that home prices have increased 40% in the four years since.
But the growth in the combined regional areas has been 54%, compared with 35% in the combined capital cities.
So there’s your first answer: based on this evidence, the regions have out-performed the cities overall.
When you divide Australia into the 15 major jurisdictions (eight capital cities and seven state or territory regional areas), the top two areas are regional and six of the top nine are regional precincts.
Regional Queensland ranks No.1, with home values up 66.5%, followed by Regional South Australia, up 66.2%.
The next on the list are Adelaide in third place, Brisbane fourth and Perth fifth.
Then, in order, come Regional WA, Regional Tasmania, Regional NSW, Regional Victoria and, in 10th place, the ACT.
You’ll note that those are the top 10 on the list of 15 jurisdictions, and Sydney and Melbourne haven’t featured yet.
Sydney ranks 12th out of the 15 and Melbourne ranks 14th – or second last.
So there’s a fairly emphatic answer: the regions have undoubtedly out-performed the cities – and the best performers among the cities don’t include the two biggest ones.
Adelaide home prices increased 64% and Brisbane 63%, to be the strongest capital cities on capital growth over four years, compared with 35% in Sydney and just 17% in Melbourne.
When PropTrack looked at the individual locations within the regions and the cities, the Top 10 list of locations for capital growth in the past four years comprised regional centres and the outer ring areas of capital cities.
The Wide Bay region of Queensland was the top individual area on price performance, with values up 80% in four years.
This notable growth region includes regional centres like Hervey Bay, Bundaberg, Gympie and Kingaroy – all places which have featured in recent years in our Hotspots reports.
Next was Ipswich City, in the outer south-west of Greater Brisbane, followed by the Outer North of Greater Adelaide – both up by more than 75%.
At Hotspotting, we have strongly advocated Ipswich and northern Adelaide LGAs like Salisbury, Playford and Gawler in the past several years.
Fourth on the list was the Gold Coast, which rose 74% in the four years.
It’s notable that 9 of the 10 locations on the national top 10 list are in Queensland and South Australia.
And here’s a final thought.
What I’ve just described is what’s happened in the past four years.
There’s no guarantee the same will happen in the next four years.
As we often tell people, the past does NOT inform the future.
But it’s worth noting that, based on the metrics we use at Hotspotting, we do expect Brisbane, Regional Queensland and Adelaide to be among the best performers on price in the next year or so.
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We’re constantly asked at Hotspotting whether it’s better to invest in the regions or the capital cities – and whether you get higher capital growth in the outer-ring suburbs of our cities or the so-called prime inner-city locations.
Now, there’s no definitive answer to questions like that, because there are so many different scenarios to consider – and, at the end of the day, it comes down to the performance of individual local markets and you simply cannot generalise.
But, based on the evidence of where the highest capital growth has occurred in the past four years, I would have to say the best performers have been found in regional areas and the outer-ring precincts of capital cities – NOT including Sydney or Melbourne.
PropTrack, which is Hotspotting’s preferred source of property data, has analysed capital growth since March 2020 – which is when the Covid lockdowns started to happen.It shows that home prices have increased 40% in the four years since.
But the growth in the combined regional areas has been 54%, compared with 35% in the combined capital cities.
So there’s your first answer: based on this evidence, the regions have out-performed the cities overall.
When you divide Australia into the 15 major jurisdictions (eight capital cities and seven state or territory regional areas), the top two areas are regional and six of the top nine are regional precincts.
Regional Queensland ranks No.1, with home values up 66.5%, followed by Regional South Australia, up 66.2%.
The next on the list are Adelaide in third place, Brisbane fourth and Perth fifth.
Then, in order, come Regional WA, Regional Tasmania, Regional NSW, Regional Victoria and, in 10th place, the ACT.
You’ll note that those are the top 10 on the list of 15 jurisdictions, and Sydney and Melbourne haven’t featured yet.
Sydney ranks 12th out of the 15 and Melbourne ranks 14th – or second last.
So there’s a fairly emphatic answer: the regions have undoubtedly out-performed the cities – and the best performers among the cities don’t include the two biggest ones.
Adelaide home prices increased 64% and Brisbane 63%, to be the strongest capital cities on capital growth over four years, compared with 35% in Sydney and just 17% in Melbourne.
When PropTrack looked at the individual locations within the regions and the cities, the Top 10 list of locations for capital growth in the past four years comprised regional centres and the outer ring areas of capital cities.
The Wide Bay region of Queensland was the top individual area on price performance, with values up 80% in four years.
This notable growth region includes regional centres like Hervey Bay, Bundaberg, Gympie and Kingaroy – all places which have featured in recent years in our Hotspots reports.
Next was Ipswich City, in the outer south-west of Greater Brisbane, followed by the Outer North of Greater Adelaide – both up by more than 75%.
At Hotspotting, we have strongly advocated Ipswich and northern Adelaide LGAs like Salisbury, Playford and Gawler in the past several years.
Fourth on the list was the Gold Coast, which rose 74% in the four years.
It’s notable that 9 of the 10 locations on the national top 10 list are in Queensland and South Australia.
And here’s a final thought.
What I’ve just described is what’s happened in the past four years.
Thre’s no guarantee the same will happen in the next four years.
As we often tell people, the past does NOT inform the future.
But it’s worth noting that, based on the metrics we use at Hotspotting, we do expect Brisbane, Regional Queensland and Adelaide to be among the best performers on price in the next year or so.
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Missing episodes?
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Are you ready to take your investment journey to the next level?
Look no further, because we have exciting news to share with you!
We are thrilled to announce our new Hotspotting pre-recorded interviews with some of the top 1% of Australian investors who own 5 or more properties.
As you may know, in the 2020-2021 financial year, only 0.87% of investors in Australia owned 5 or more investment properties. But what do these successful investors know that the majority don't? We have sat down with a number of them to get exclusive insights into their strategies, tips, and personal journeys.
Our pre-recorded interviews bring you valuable knowledge and advice from Australian property experts who walk the walk and practice what they preach. Learn from their mistakes, successes, and unique perspectives on property investment. These interviews are a must-watch for anyone looking to build a successful investment portfolio and achieve financial freedom.
With over 71% of investors owning only one investment property, we understand the challenges and uncertainties that come with growing your portfolio. That's why we have curated a series of interviews that exclusively feature investors with multiple properties. They represent the top 1% of Australian investors and have achieved remarkable success in their investment journey.
Our pre-recorded interviews are available for you to watch at your convenience, so you can take in all the knowledge and insights at your own pace. Hear firsthand how they navigate the ever-changing property market and make profitable investment decisions. You'll be able to walk away with practical tips and strategies that you can implement in your own investment journey.
About Matt Wilson
Matt is the founder of WT Capital & the chief storyteller. He started his career not in property but in the 3 Michelin starred kitchens of Paris, after returning to Sydney he brought an unseen level of service to the emerging buyers advocacy space.
WT Capital was founded with one goal in mind, to deliver the highest quality service throughout each property transaction.
www.wtcapital.com.au
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Many Australians grow their wealth through passive investment in real estate: buy a property, install a tenant and wait for growth.
There’s a better, and faster, way – without high risk.
More and more investors are using development strategies to accelerate the wealth-creation process, with small subdivisions one of the most accessible and successful.
Wealth mentor Brad Cassidy of The Kaizen Way teaches these strategies to investors across Australia, with notable results.
Recently, our Hotspotting founder Terry Ryder hosted Brad on a webinar to discuss how to profit from small subdivisions.
The webinar demonstrates how to …
** undertake a subdivision as a “hands-off” investment
** find the right team of specialists to facilitate the process
** avoid common mistakes and pitfalls
** identify the costs involved, including council fees and charges
** understand the procedures with case studies of successful projects
** find opportunities for this type of investment, using an exclusive tool developed by Brad and his team
If you would like to find out more about how Brad can help you, please follow the link below and add your details so that you can take advantage of a huge bonus woth $3,995 for the first 5 people.
Plus a special price on his membership offering. https://propertymasterythekaizenway.com/terry-special
You can watch the replay of this webinar on youtube here: https://youtu.be/t5WdKo-75l4
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At Hotspotting we’re always on the alert for evidence of CHANGE that will influence property markets.
The great potential in residential real estate is that change is always happening, opening up new possibilities for growth.
One of our catch-cries at Hotspotting is that THE PAST DOES NOT INFORM THE FUTURE.
Poor performers of the recent past can become the nation’s leaders of the near future.
One of the biggest trends we are tracking, under the general theme of change, is the rise and rise of apartments – 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 – be they units, townhouses or apartments.
Buyer demand in locations where units dominant the dwelling mix - or are a significant part of the dwelling mix - has been rising notably for the past 12 months.
Suburbs where units dominate the dwelling mix 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.
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; and
investors seeking affordability and higher rental yields in good locations.
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 Southport 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 is close to 10% per year.
There are many, many more examples like this across Australia.
So there is a significant list of good reasons why apartments are attracting growing demand from a range of buyers.
And that means that the dominant paradigm of real estate is looking decidedly shakey.
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I’ve been in and around news media my whole adult life and I STILL haven’t got used to the way journalists these days can look at a set of numbers that are overwhelmingly positive but find the only negative – and make that their headline.
Somehow, journalists have formed the view that we’re endlessly attracted to screaming negatives and don’t want to hear about anything UPLIFTING that’s happening in the world.
Recently, one of the major real estate data firms published data on the property ownership rates for women and men in Australia.
This was topical because there’s a lot of focus on ways that females are financially disadvantaged, including with the level of super the average woman has at retirement, compared to men.
So the findings of this analysis by CoreLogic was a strong and positive story, because overall it showed that women are more likely to own real estate than men – only slightly, but that finding would have surprised a lot of people.
In some age groups, such as Millennials and Gen X, women were significantly ahead of men on property ownership and with the oldest grouping, Baby Boomers, it was fairly even.
Only with Gen Z, those aged under 30, were males more likely to own property than women.
So, overall, a pretty positive story, right?
Well, no, many reporters managed to turn this into a negative, by focusing their coverage on the only age group that was less successful for women, the Gen Z cohort.
Sadly, typical.
In another recent story, the Pain and Gain report from CoreLogic showed that, in most market jurisdictions across Australia, the vast majority of sales in the past 12 months had been profitable for the vendor.
In Brisbane, every suburb had recorded growth for vendors, both for house sales and unit sales – a 100% success story right across the city.
It was similar in Adelaide, Perth and Sydney – close to 100% of suburbs had delivered house price growth and unit price growth for vendors in the past year.
But a lot of the media coverage found a negative for their headline. In Melbourne, 82% of suburbs recorded annual growth in unit prices – but the media coverage focussed on the 18% that didn’t.
“Nearly one in five suburbs recorded price falls,” shouted one headline.
There are myriad examples of media’s desire to focus on – or create – sensational negatives, with little or no attention to the potential positives.
Every day, across Australia, there are articles describing the rental shortage – which doesn’t fit the definition of “news” because everyone KNOWS there’s an under-supply of rental homes – but it’s very rare to see anyone write about potential solutions to the shortage.
It’s even less likely that you will see anything published that sets out to help tenants seeking a decent place to rent.
Housing affordability is seen by journalists as a hot button issue and they write about it endlessly, but usually only from the perspective that it’s hopeless for wannabee first-home buyers, that it takes decades to save a deposit and that they’re doomed to a lifetime of renting – although, clearly, none of that is true.
It’s very rare to see anything published that HELPS young buyers, with advice on how they can get into the market.
The degree to which news media is disinterested in being HELPFUL to people – focussing instead on startling everyone to create clickbait – is quite distressing.
In news media, the oldest adage of all – If It Bleeds, It Leads – still applies, sadly.
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Are you ready to take your investment journey to the next level?
Look no further, because we have exciting news to share with you! We are thrilled to announce our new Hotspotting pre-recorded interviews with some of the top 1% of Australian investors who own 5 or more properties.
As you may know, in the 2020-2021 financial year, only 0.87% of investors in Australia owned 5 or more investment properties. But what do these successful investors know that the majority don't?
We have sat down with a number of them to get exclusive insights into their strategies, tips, and personal journeys. Our pre-recorded interviews bring you valuable knowledge and advice from Australian property experts who walk the walk and practice what they preach. Learn from their mistakes, successes, and unique perspectives on property investment. These interviews are a must-watch for anyone looking to build a successful investment portfolio and achieve financial freedom.
With over 71% of investors owning only one investment property, we understand the challenges and uncertainties that come with growing your portfolio. That's why we have curated a series of interviews that exclusively feature investors with multiple properties. They represent the top 1% of Australian investors and have achieved remarkable success in their investment journey.
Our pre-recorded interviews are available for you to watch at your convenience, so you can take in all the knowledge and insights at your own pace. Hear firsthand how they navigate the ever-changing property market and make profitable investment decisions. You'll be able to walk away with practical tips and strategies that you can implement in your own investment journey.
In our latest episode of 'Interviews with the 1%', we are excited to host Marion Mays, the founder of Money Strong
In this episode, hosted by Tim Graham, Marion shares her property journey that started with buying a commerical property as her first investment, followed by a string of multiple investment properties starting at the age of 25 before finding herself in a dysfunctional relationship with a 7-month-old child and having to lean on her portfolio to not only provide a safe shelter for her and her son but also to fund 15 years worth of family court litigations.
This is a remarkable story of resilience along with a great reminder that real estate not only provides great shelter and wealth creation but also security for when things turn bad.About Marion Mays
Marion is the Founder of Money Strong- a boutique professional mentoring firm that advocates financial literacy and proactive wealth accumulation for Women and men.
Marion lives by the philosophy that “Every woman should own one little black dress & one piece of real estate in her own name”.
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At a time when Australia is buckling under the weight of the dwelling shortage problem, population growth is occurring at record levels, mostly because we are bringing in migrants at unprecedented levels.
The latest data from the ABS shows that the national population rose 2.5% last year.
That means 660,000 added to the Australian population, lifting the total close to 27 million – which is a milestone achieved well ahead of the official government forecasts.
This historically high level of population growth has been fuelled by new people arriving from overseas.
Overseas migration, in fact, accounted for 83% of the increase in population last year, with the rest achieved with “natural increase”, which means that births exceeded deaths.
Net overseas migration was 548,800 – up 60% compared to the previous year.
Those numbers, startling as they are, beg one very big question: where are they all going to live?
We already have an unprecedented shortage of dwellings in this country, especially dwellings available for rental.
The current national vacancy rate, according to Domain, is 0.7%.
Six of the eight capital cities have vacancy rates well below 1%.
The building industry is unable – for a host of reasons - to produce new dwellings at the rate required to keep up with the rapid growth in household formation.
Vacancies are destined to go on falling and the serious under-supply of dwellings will not only continue, but get worse.
And that means the upward pressure on prices and rents will continue.
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The politicians and talking heads of Australia are willing to consider or recommend ANYTHING as a solution to the rental shortage – anything EXCEPT the only thing that will work.
And which, incidentally, would be really easy to implement and would have much faster outcomes than the many crackpot schemes that are being suggested.
Every day mainstream media is full of articles about the rental crisis – with an emphasis on extreme situations, sensationalist headlines and the demonising of landlords as the arch-villains of the situation.
There are also growing instances of “big idea” solutions – and media loves those as well.
Some have suggested we can solve the crisis with pre-fabricated homes.
Others have suggested converting dis-used or under-utilised office space to apartments in inner-city areas.
There are moves by state and local governments to force people who use short-term letting options like Airbnb to switch to permanent rentals, but independent university analysis has shown that this won’t fix the shortage – because fundamentally Airbnb is NOT the problem.
Some states are fining people who own properties that APPEAR to be empty, such as holiday homes owned by a family for use by family members – but that won’t have any material impact either – because this, too, is not the cause of the rental shortage.
There have been suggestions of re-purposing refugee facilities or Covid quarantine facilities or army barracks as rental accommodation for the needy.
The Greens, in their collective madness, announced in the lead-up to the Queensland local government elections that they would take Brisbane’s biggest horse racing track from its legal owners and turn it into thousands of cheap homes – all for about $40 million, they said - apparently regardless of the reality that the legal owners of the land have rights and the value of the land is, realistically, measured in the hundreds of millions of dollars.
But media lapped it up and gave it enormous mileage, even though it was pie-in-sky, pixie-eyed, idealistic nonsense, with no practical merit whatsoever.
There are constant references by politicians and commentators to the need to build more dwellings, although that is NOT the solution to the rental shortage.
In terms of housing affordability, media is full of alleged solutions like tiny houses, or pre-fab houses, or land-lease arrangements (where you own the house but not the land, on which you have to pay rent).
All of this fluff in the media is a distraction from the real issues and the only viable solutions.
We have to provide incentives, rather than discouragements, to the people who provide over 90% of the homes that are rented in Australia – mum-and-dad property investors.
And politicians at all levels of government have to stop treating the housing industry as a cash cow, because THAT is the main reason why dwellings are so expensive in this country.
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One of the factors we’re constantly searching for, among the thousands of markets across Australia, is CHANGE.
We’re on the look-out, every day, for locations where the performance of the property market is set to go to another level because of major changes in the local economy.
We sometimes surprise people by recommending areas that have a POOR TRACK RECORD on capital growth.
But, essentially, we don’t care about the PAST when we’re choosing locations to recommend. We’re only interested in the FUTURE.
When we find a location where a major program of infrastructure development is under way, or there’s a big change in the local economy - and we feel confident that this will generate elevated demand for real estate in the area - WE DON’T CARE if that location has delivered minimal growth in the past 10 years.
Our process, fundamentally, is about the FUTURE.
Let me illustrate the point with some case studies.
In the July 2020 edition of our most popular report – the National Top 10 Best Buys report – we listed the Sunshine Coast as our No.1 pick.
With the benefit of hindsight, it may appear to be a case of the bleeding obvious.
But, at that time, it was quite different.
NO ONE wanted to buy Sunshine Coast real estate back then because its track record on capital growth was terrible.
At that time, the long-term capital growth averages of most suburbs ranged from 1% per year to 3% per year. A 10-year growth average of 3% per year means it would take 24 years for property values to double - and property buyers want much better than that.
In the iconic suburb of Twin Waters, the median house price had dropped 13% in the previous 12 months and the long-term growth average was just 2% a year.
The vacancy rate for Mooloolaba at that time was above 3%, the precinct around Kawana and Minyama was 3.5% and at Noosa it was above 6%.
Why would anyone want to buy there in 2020? You would have to be mad, right?
But anyone who DID follow our recommendation, and bought on the Sunshine Coast in 2020, would have experienced, in the next three years, some of the most spectacular capital growth anywhere in Australia.
The median house price at Coolum Beach rose from $700,000 in mid-2020 to $1.35 million today – and median unit price rose from $450,000 to $800,000.
The median house price at Sunshine Beach rose from around $1.5 million at the start of 2020 to $3.5 million by the start of 2022. It more than doubled in two years! And the median unit price rose from $800,000 in 2020 to $1.5 million today.
At Twin Waters, which had such a poor record in 2020, the median house price rose from $800,000 to $1.5 million by mid-2022.
There are many, similar, examples throughout the Sunshine Coast market.
So, WHY did we recommend a location with such as bad track record in 2020?
Because we didn’t care about the past, we were focussed on the future.
Infrastructure projects totalling over $20 BILLION were under way or in planning.
It was a no-brainer that this would transform the Sunshine Coast market – and it did.
Here’s another example.
We were recommending locations in Perth in editions of the Best Buys report in 2021 – three years ago.
The April 2021 edition of the report featured the City of Rockingham, an affordable bayside precinct in the south of Greater Perth.
At that time, most suburbs of Rockingham had long-term capital growth rates of MINUS 1% or 2% per year. In other words, prices there were LOWER in 2021 than they were 10 years earlier!
Why on earth would anyone recommend a location where property owners had lost money for the previous decade?
Because we could see THE CHANGE coming – in that location and in Perth generally.
In the suburb of Golden Bay, the long-term capital growth average in early 2021 was -2% per year. The median house price, then, was $330,000. Today it’s $515,000 – it’s risen almost 60% in three years.
At Port Kennedy, it’s gone from $350,000 to $550,000.
There’s been a similar outcome for every suburb in the City of Rockingham in the past three years.
But at the time we recommended it, these locations had capital growth records that were among the WORST in the nation.
Now, here’s the key thing:-
Most real estate consumers would rather buy in an area where prices have grown 50% or 60% in the past two or three years, than buy in an area where prices have shown little growth recently.
There are far more people wanting to buy in Perth NOW, at the peak of the boom, than there were in 2021 before the boom started.
This makes little sense to the team at Hotspotting. We would rather buy in a location with strong future growth credentials when that market is DOWN, than when it’s at its peak.
But many investors, it seems, need the APPARENT security provided by recent high growth.
That attitude, we believe, shows a lack of understanding of real estate dynamics and fundamentals.
Here’s the key learning from this:
DO NOT let a poor track record prevent you from buying in an area that has future growth potential.
The past is often irrelevant. What matters is the FUTURE.
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It’s true that if you invest wisely, you can grow substantial wealth through property investment but how big can you go?
Can you double your net assets and keep doubling them to hit a $1million or $10 million or even $1billion?
Strategic financial adviser, Andrew Courtney of Plenitude Wealth, says you can and he will join Hotspotting founder Terry Ryder on Wednesday 20 March for a webinar to reveal how the “Doubling Game” and real estate investment can accelerate the process.
Courtney, an acknowledged expert on The Doubling Game, explains it like this: If you start off with $1,000 and double it 10 times you get to $1 million. Double it 10 more times you get to $1 billion. In other words, if you could double your net assets 20 times you would be a billionaire. It's all about how fast you can double.
The challenge, as you move along the cycles, is that it becomes harder and harder to speed up the process. Courtney says "achieving this level of wealth is impossible unless you're an investor. Ideally, you would have a scalable business and you need to be an investor as well,” he says. Real estate can be central to the process. Depending on where you are in the game and how much time you have, this will determine how much real estate comes into play.
In this webinar replay Andrew & Terry discuss the level of capital you need, to achieve the income you need, to create the lifestyle that you want.
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When you have a major national crisis caused by the shortage of a key product, you take steps to facilitate an increase in the provision of the thing that’s in short supply. Right?
And that would logically involve providing incentives to the people who supply the commodity that’s scarce - or otherwise creating conditions that make it easier for them to create more of that commodity.
You would, wouldn’t you?
Well, you would think so in a sensible world, but that’s not what happens in Australia.
Not in the housing market, where the opposite happens. Federal, state and local governments keep making decisions that make the rental shortage worse and the general under-supply of new dwellings worse.
In the housing market, there are two things that have a serious under-supply: there’s a shortage of new homes being built and there’s a shortage of properties available for rental.
Many people think it’s the same thing – that you fix the rental shortage by building more homes, but that’s NOT the solution.
They are two separate (although related) issues and both problems are getting more and more serious because politicians keep making them worse.
We need to build a certain number of new dwellings each year in Australia to keep up with population growth, fuelled in part by overseas migration, and the formation of new households.
In recent years, Australia has fallen well SHORT of the numbers of new dwellings needed, for a host of reasons.
The Federal Government has an ambitious target of 1.2 million new homes in five years but there is no chance of this being achieved.
One of the key reasons that we WON’T build enough new homes is because state and local politicians keep making it harder and more costly to create new dwellings.
We already have a situation where UP TO HALF of the cost of creating a new house-and-land package is government taxes, fees and charges.
Studies have shown that the taxation component of a new house ranges from 35% in cities like Brisbane and Melbourne, up to 50% in Sydney.
Politicians keep tinkering with the design of new dwellings – in theory, to make them safer, or more accessible, or more environmentally friendly – but every time they change the rules affecting the construction of new homes, they make them more expensive.
That’s the affordability problem in a nutshell. All levels of government using the housing industry as a cash cow and milk it for revenue through a range of taxes, fees and charges. And they keep making dwellings more expensive with supposedly well-intentioned new rules.
They also contribute to the shortage of new homes and the higher cost of new homes by taking people resources out of the home building industry to build headline-grabbing new infrastructure projects.
Many big real estate projects, such as high-rise apartment developments across Australia, have been scrapped because the developers can’t get the tradespeople they need or the materials they need, and because the costs are SO HIGH that building those projects is not financially viable.
In the ACT, the Territory Government has introduced new rules for the personal liability of directors of dwelling providing entities, including not-for-profit organisations like community housing providers.
These rules are so severe that it is likely to cause a mass exodus of builders and community organisations from the ACT, thereby worsening the housing shortage there.
Here’s one of the consequences of these poorly drafted laws: if you join a board of a community housing provider today, and they have a house that was built five years ago and it has defects, you can now be held personally liable for the costs even though you were not on the board when it was built.
This has come about in Canberra because the Greens, the most destructive force in Australian politics, have a share of power in the ACT government and they regard anyone involved in the housing industry as the enemy.
Make no mistake, if you own a business or if you are an owner of investment real estate, the Greens regard you as something close to a criminal who needs to be squashed.
They are obsessed with the notion that property investors are all rich bastards who own 10 or 20 properties and are monstering their tenants and ripping off the tax system.
This is patently and blatantly false, but the Greens are not interested in hearing any alternative viewpoints.
They are the petulant brats of Australian politics.
And I’m pleased to observe that, despite all their posturing and grandstanding, the Greens failed to have any impact on the election for the Brisbane City Council, the biggest LGA in the nation, or on the two state government by-elections held in Queensland at the same time.
There’s no doubt that the serious and unprecedented shortage of rental properties across Australia has been caused by political decisions that have made investment ownership less and less attractive.
Vacancy rates have been falling steadily for the past five years to the current unprecedented low levels – and you can chart the decline in the number of available rental properties with a series of state government decisions which have made ownership onerous and caused more and more investor owners to sell up and get out.
Australia’s best real estate analyst, Simon Pressley of Propertyology, confirms that there have been 20 major state government legislations in recent years, all of them detrimental to the owners of investment properties.
He points out that the Australian population has increased by 3 million in the past eight years – but, in that time, the number of homes available for rental has DECREASED 58%, and the number of homes listed for sale has DECREASED by 36%.
Those are incredible numbers which explain, in simple terms, the seriousness of the shortage crisis.
And the politicians – mostly state governments – who have caused this dire situation are still doing it. They continue to make decisions and pass laws which make it worse.
They keep slamming the people who are the source of the product that’s in short supply.
Investors who own in Victoria are selling up and getting out in large numbers, because Victoria is by far the most unfriendly state in Australia for property investors.
They have increased existing taxes on owners and they have introduced new taxes on the people who supply the product that’s in short supply.
There are big increases in land tax, a new absentee owner surcharge, a new short-stay accommodation levy and a new vacant residential land tax on empty homes.
There’s also a new construction code which increases the costs of new dwellings and there are restrictions of rental increases.
James Kirby, wealth columnist for The Australian newspaper, commented on 15 March that the taxation nightmare imposed by the State Government was the reason why Melbourne is the worst-performing residential property market in the nation.
As a result of these measures, in just one month, the vacancy rate in Melbourne dropped from 1.5% to 1.0%, a huge change in such a short time frame. And, believe me, it will get worse.
But it’s not just Victoria. Every state and territory has made changes that shift the power balance to tenants and/or increase the costs of owners, causing more and more investors to sell.
South Australia has recently launched changes to its tenancy laws.
The political statement says: “New rental laws have been passed by the Parliament of South Australia to improve protections for tenants WHILE BALANCING THE RIGHTS OF LANDLORDS.”
That’s the political rhetoric. Here’s the reality: there are 17 major changes, all shifting the balance to tenants.
For example, reduced rental bonds, a ban on rental bidding, restrictions on what you can ask tenants when they applying to rent your property, limits on rent increases, new rights to tenants to sub-let, new penalties on landlords for various breaches (but none for tenants), restrictions on ending tenancies, more rights to tenants in disputes, the notice period to end tenancies increased from 28 to 60 days, a limit on inspections by your property manager, you can’t refuse pets, and new rights to tenants to make modifications to your property.
And the measures which balance the rights of the property owners?
Well, there are none.
And that, in simple terms, is why we have a chronic rental shortage which has no end in sight.
It keeps getting worse, because state governments keep making it so.
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The most successful property investors that I know have some features in common and making decisions based on research is one of the key ones.
But those people are relatively rare.
It seems to me, from observing the behaviour of investors for the past four decades, that more people make investment decisions based on media soundbites than on genuine research.
Far too many people are leaping recklessly into the Perth property market because mainstream media keeps telling them that prices are booming and will keep on booming, backed by commentary from real estate people who have a vested interest in prolonging the Perth boom for as long as possible.
At Hotspotting, we think this media soundbite approach is fraught with peril and that many of the people piling into the Perth market at the moment will regret their decisions, made in haste without proper due diligence.
It’s a reflection of those views that the new edition of the National Top 10 Best Buys report does not include any locations in Perth.
Based on detailed research, we think this market has peaked and will not be the national leader on price growth in 2024, as many are predicting – or hoping.
We think there are other, better places for people to be putting their money – safer, less volatile, less heated markets with good potential for capital growth.
Our choices for good locations to buy in 2024 are based on research-based knowledge of the key trends that are driving demand in the best locations across Australia.
We’re not focused on short-term sugar-hit gains – rather we’re focussed on places we think will do well in the medium to long term.
We base our choices on economic factors, on demographic trends and on the locations of influence from big infrastructure developments.
At Hotspotting, we are constantly on the look-out for evidence of change in property market trends and in individual locations.
Places that have been weak performers on capital growth in the past can become the leaders of the future, because something major has changed in that market – often caused by the development of major new infrastructure.
Sometimes it’s a significant demographic shift – such as the trend which has seen growing numbers of people leaving the biggest cities and moving to smaller cities or to regional areas, in search of a different and more affordable lifestyle, enabled by technology.
More recently, we have observed a surge in demand for units and townhouses by a range of different buyer cohorts, for a host of different reasons – and this is changing one of the dominant paradigms of real estate – that houses outperform units on capital growth.
All of these factors are reflected in our new edition of the National Top 10 Best Buys report.
It’s our most popular report, because it’s the one that considers all the events and trends happening across Australia – and identifies the markets with the best prospects for future capital growth.
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In our latest episode of 'Interviews with the 1%', we are excited to feature Best-Selling Author Nicola McDougall.
In this episode Nicola shares her property investment journey including her parent's teachings, purchasing her first property tenants in common with her brother and growing her portfolio from there.
Nicola details the struggles that women can face on single incomes but shares some tips on how to make the most out of your situation.
About Nicola
Nicola McDougall is one of Australia’s most well-known property investment experts and is the co-author of the best-selling book, The Female Investor – Creating Wealth, Security & Freedom Through Property and Property Investing For Dummies (3rd Australian edition).
She is also a multi-award-winning property and finance journalist, industry spokesperson, business owner, and successful property investor.
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The housing crisis in Australia has been the hot topic for a number of years now. But how did we get here?
Tune in to our latest podcast with Terry Ryder & Simon Pressley of Propertyology. Arguably two of the best minds in Australian Real Estate.
About Simon Pressley
Managing Director of Propertyology and 3-time Australian (REIA) Buyer's Agent Of The Year, Simon Pressley was inducted into the Australian Real Estate Hall of Fame in 2015.
Simon is passionate about helping everyday Australians to build a more sustainable lifestyle through making astute property investment decisions. He (unapologetically) is renowned for challenging conventional wisdom to help people have a smoother journey to a better destination.
A strong lateral thinker and a thought leader, Simon spends several hours everyday studying the property economics of Australia's towns and cities. His strong and passionate opinions are often featured in the media.
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The chronic housing shortage that we’ve been hearing so much about lately is getting worse – and will continue to get more and more serious.
Three major measures of the supply of homes, both for purchase and for rent, are heading in the wrong direction for a nation that needs solutions from our politicians.
Building approvals continue to fall when the nation needs them to be rising, loans for the purchase of new dwellings are also heading in the wrong direction, and vacancy rates continue to go lower, when the one-third of households that rent need them to rise to take the pressure off rents.
And what are our state and federal governments doing to solve this crisis?
Well, collectively, they’re making it worse.
They keep passing laws that make owning an investment property more and more onerous, causing growing numbers of owners to sell, thereby reducing the rental pool and making vacancies worse.
They also keep adding to the costs of creating new homes, which makes it harder for the building industry to provide the new supply the nation needs.
The Federal Government has set the grand target of 1.2 million new homes over five years but, as is so often the case with politicians, they haven’t thought much about it beyond the press conference.
When the Government says it’s going to build 1.2 million new homes, what it really means is that it hopes the building industry can somehow deliver its target - without actually having any policies to address the problems which will mean this grand objective is unattainable.
All the latest data shows how far behind we are in terms of achieving this goal.
Currently, the production of new dwellings in Australia is the lowest it has been in 12 years.
Approvals to build new houses showed an almost 10% decline in January, compared to December. Seasonally adjusted, the January numbers were the weakest since June 2012.
In the past 12 months, there have been approvals to build 101,000 new houses, the lowest in more than a decade.
The ABS data shows that new house approvals have fallen in four of the past six months – and there is a clear pattern of decline in new homes at a time when we need it to be picking up.
Meanwhile, the Housing Industry Association says that the number of loans issued for the purchase and construction of new homes fell by 4.2% in January and remains at its lowest level since 2008.
HIA Chief Economist Tim Reardon says lending for new homes was at record lows in 2023, and this downward trend has continued into the new year.
The trend surprises no one in the housing industry, where there is widespread cynicism about the Federal Government’s grand announcement, without any policy substance to deal with the many issues that plague the home building industry.
There continue to be shortages of materials and tradespeople, costs continue to be high, elevated interest rates don’t help and we continue to see building companies go broke week by week.
Australia is currently having a boom in infrastructure construction and that has sucked a lot of resources out of home building.
State Government and local council meddling with the process continues to cause costly delays and to add to the cost of building new homes, making it increasingly difficult to operate profitably.
The weakness in building approvals nationally is being seen at a state level as well.
In Victoria, the number of houses approved for construction has dropped to the lowest level for over a decade – with approvals in January the lowest since October 2013 – and this in a state where the State Government had said it would build 800,000 new dwellings in a decade.
Victoria has one of the weakest situations in the nation, not helped by having the highest property taxes among the states and territories - with new imposts being imposed in 2024 to further discourage investment and construction.
In Tasmania, building approvals have dropped 30% in the past two years.
Indeed, in January private sector house approvals fell in all states, including by 17% in Victoria and by 13% in NSW.
The third measure of the chronic dwelling shortage is vacancy rates for rental properties, which have been dropping steadily for the past 5-6 years.
They were already at historic lows across Australia but the latest vacancy rate data shows them going lower still.
The national vacancy rate recorded by SQM Research fell from 1.3% in December to 1.1% in January, with vacancies falling in all eight capital cities.
State and territory governments continue to make decisions and pass laws that are detrimental to property owners, causing investors to sell, thereby reducing the rental pool further.
Investors owners are already faced with massively increased costs through higher interest rates, increased council rates, rising state taxes, higher insurance premiums and increased maintenance costs.
Years of detrimental decisions by governments has created this chronic rental shortage and it continues to get worse.
The Victorian State Government is introducing a raft of measures in 2024 which collectively are a major discouragement to property owners – and more and more investors are selling up and getting out of the Victoria.
It’s significant that, according to the SQM Research figures, the biggest decrease in vacancy rates was seen in Melbourne, which dropped from 1.5% in December to just 1.1% in January – a massive change in a single month.
Another property data source, PropTrack, also puts the national vacancy rate at 1.1% - but a third source, Domain, has an even lower figure – just 0.7% in February, down from 0.8% in January.
This is a new record low, according to Domain, which says the mismatch between low supply and rising demand is an ongoing challenge for tenants amid rapid population growth (boosted by overseas migration), a strained construction sector and rising property prices locking people into renting for longer.
According to the Domain figures, six of the eight capital cities have vacancy rates below 1%, including just 0.3% in Adelaide and in Perth.
All of this information presents a grim picture for the supply of homes, both for sale and for rental, across Australia - and means that prices and rents will continue to increase.
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They say that insanity is doing the same thing over and over again and expecting different results.
By that definition, many of the nation’s most high profile economists are insane.
One of the defining characteristics of Australia’s leading economists is that they will never change their theories about housing markets and property prices, no matter how often they are exposed as being wrong.
The senior economists working for the big banks continue to discuss the entity they call “the Australian property market” in terms of interest rates as the biggest factor of influence, despite having their views cruelly exposed by the results of 2023 (when they all predicted prices to fall 15% or more because interest rates were rising, only for prices to rise strongly).
Their forecasts are ALWAYS wrong because they think it’s all about interest rates and they refuse to admit that their simplistic mindset is flawed. So they keep getting it wrong.
But perhaps the greatest example of refusing to let go of pet theories, despite repeated failures, comes from the senior economist for AMP Capital Shane Oliver, who gets my award as the worst forecaster of property price trends in the nation.
Oliver has long had his nose out of joint because property prices refuse to behave themselves, according to his world view, and because housing is “over-valued”, according to his cherished theories.
It was Oliver who famously went public in 2005 to declare there would be no growth in property prices across Australia for the next 10 years because property was massively over-valued back then.
Here’s what he said in 2005: “House prices are at least 25% over-valued and may not start to rise again for another decade. It will take 10 years for rents and wages to catch up with house prices and there will be no rise in the housing market until they do so.”
But, of course, property prices did indeed rise between 2005 and 2015 – a lot.
According to the ABS, Sydney’s median house price rose from $494,000 in 2005 to $864,000 in 2015, while Melbourne increased from $320,000 to $570,000 and every other capital city had similar increases.
There were also big increases in median prices for apartments in ALL of the capital cities.
So how could a senior economist for a major national institution get it so wrong?
Essentially, it’s because of the belief that house prices should be intrinsically linked to other factors like rents, for example, as declared by Oliver back in 2005.
But there is no evidence I’m aware of that this linkage exists. In my 40-plus years researching and writing about Australian residential real estate, I have never seen any evidence that the level of house prices is dictated by residential rents, or influenced by them in any way.
House prices rise because of competition in the market. If a house is for sale and there is more than one person interested in buying it, this will tend for put upward pressure on the price. This is particularly so in an auction situation, but can also happen in private treaty sales.
This is notably so in recent times, with ongoing strong demand for properties (inspired in part by strong population growth, boosted by high migration levels) at a time when supply is historically low.
We are not building enough new dwellings and there is a shortage of listings of properties for sale, relative to buyer demand.
So, prices are rising. Competing buyers at an auction don’t spend any time thinking about rental levels, keeping in mind that the vast majority of buyers in the market are home buyers, not investors.
Now, here’s the broad definition of fair market value used by the people whose job it is to estimate such things, property valuers:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
You will note that there’s nothing in there about connections with residential rentals or current wage levels. It’s simply about the price arrived at in a competitive market.
But, despite being so spectacularly wrong about what would happen to property values in the decade following 2005, not to mention his forecasts for price outcomes in Australia in the past several years, has Oliver discarded his theory and sought something more credible?
Sadly, no.
Oliver burst into print again in early March to declare, again, that house prices have outstripped what he terms “fair value” in many parts of Australia.
He published an analysis, for want of a better word, that found that house prices across Australia were over-valued by “more than 29%”.
In Sydney, he said, houses are over-valued by “almost 33%”, which means the median house price needs to fall by $458,000 to be considered fair value, according to his beloved theory.
Brisbane was over-valued even more, by 33.5%, and Canberra by 31%, while in Melbourne it’s 26%, according to Oliver.
What he is saying, effectively, is that everyone involved in the housing market – buyers, sellers, valuers, buyers agents and selling agents – are all idiots behaving foolishly.
How has he arrived at this stunning conclusion?
By comparing price levels with rents, in the same way as a price-earnings ratio for shares – the same method he used back in 2005 when he was so utterly wrong with his forecast for house prices for the next 10 years.
Here’s the big difference: everyone who buys shares is an investor; most of the people who buy houses and apartments are not investors, they’re home buyers, and they don’t spend a single moment considering how the price they are paying relates to how much rent they could get for the property – because they plan to live in it themselves.
Oliver’s belief is that property markets should work the same way as equity markets in determining value.
But the key point is that they DON’T. He may think they should, but they DO NOT.
Never have – and, I dare say, never will.
I note that the head of Australian economics for Commonwealth Bank, Gareth Aird, strongly disagreed with Oliver’s assessment in the same articles that published it.
Aird said that “over-valued” was a strong term and commented: “Unless you think house prices are going to fall, you can’t call them over-valued.”
Well, exactly.
Current price levels have been determined by the free and open market, as they have always been – and, far from being over-valued and therefore set to fall, dwelling prices are set to rise in 2024 in most parts of Australia.
Meanwhile, Oliver clings to a theory that was spectacularly wrong almost 20 years ago and has contributed to his extraordinary track record of failed forecasts about property prices since then.
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In our latest episode of 'Interviews with the 1%', we are excited to feature Simon Pressley of Propertyology. This is an absolute must-see episode with arguably two of the best brains in real estate here in Australia.
In this pre-recorded video Simon shares his strategies, experiences, and lessons learned along the way, giving you an inside look into how he has built his impressive portfolio.
About Simon Pressley
Managing Director of Propertyology and 3-time Australian (REIA) Buyer's Agent Of The Year, Simon Pressley was inducted into the Australian Real Estate Hall of Fame in 2015.
Simon is passionate about helping everyday Australians to build a more sustainable lifestyle through making astute property investment decisions. He (unapologetically) is renowned for challenging conventional wisdom to help people have a smoother journey to a better destination.
A strong lateral thinker and a thought leader, Simon spends several hours everyday studying the property economics of Australia's towns and cities. His strong and passionate opinions are often featured in the media. Do yourself a favour and don't miss this one!
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Australians are passionate about real estate and over two million of us own investment properties, while many more have aspirations to acquire property to grow their wealth and provide for their retirement.
But while the nation is full of people with ambitions in real estate, the reality is that relatively few people are successful with property investment.
As a nation, we’re not particularly good at property investment.
The official data shows that while more than two million Australians participate in property investment, 72% have just one property and another 18% have two.
That’s nine out of 10 investors with just one or two properties.
Those who have a portfolio - owning five or more properties - are less than 1% of the total.
The question is: why do so few achieve success with property investment?
I think it’s fair to say that most people come to real estate investment with ambition.
There’s often a dream of acquiring multiple properties and funding retirement with the proceeds of those real estate assets - possibly even retiring early.
But the data shows that most people get stuck on just one or two properties.
Why is it so?
Our experience with investors and prospective investors suggests a number of reasons:-
Many investors are herd animals, who jump into the market when they hear or read there’s a boom happening, rather than having a defined strategy heading towards a clear objective.
Far too many people are unwilling to invest in good advice and information before spending the big dollars on buying a piece of real estate – and that’s the worst kind of false economy.
Many wannabe investors are wait-and-see people - they find myriad reasons to procrastinate and avoid making decisions and moving forward - the next RBA board meeting, the result of the next election, the negative forecasts of economists, and many others.
For all of these reasons, many investors make a hash of the first investment - buying in the wrong location, paying too much or failing to do proper due diligence and ending up with a property that doesn’t perform. This makes it hard to move forward to acquire more properties.
The objective of the Hotspotting team is to help as many people as possible avoid these mistakes and make a success of property investment.
As part of that goal, we have created a podcast focused on the 1% - the special cohort of people who have created a substantial property portfolio.
In “The 1%” podcast, we interview some of Australia’s most successful property investors and advisers to find out the keys to their personal success and to learn how others can follow their lead and be part of the elite few who make it big in real estate investment.
There’s no better way to do property investment well than to follow the example of those who have made a success of it.
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Internal migration, which means people moving from one part of Australia to another, continues to be a major driver in real estate markets across the nation.
The trend we call The Exodus to Affordable Lifestyle is still pumping, with large numbers of people relocating from the biggest cities to regional areas in pursuit of a different lifestyle at cheaper prices.
The latest data and analysis from a range of sources, including the Regional Australia Institute and real estate data company CoreLogic, confirms that this remains a major demographic force, with major consequences for real estate.
It was not, as media has incorrectly portrayed, a trend generated by the Covid lockdowns. It has been happening for much longer than that and it continues to be a significant force.
Queensland has long been, and remains, one of the nation’s chief beneficiaries of this mass movement of people in search on affordability and lifestyle, powered by technology which has enabled more and more people to work remotely.
This has impacted real estate markets across the state, from the Gold Coast at the NSW border up to Townsville and Cairns in North Queensland.
In the new 2024 edition of Rising Stars, a report written by Hotspotting in conjunction with the nation’s biggest comparison website, Canstar, Queensland is ranked as the regional market with the strongest prospects for the coming year.
The Rising Stars report uses five key metrics to rank the 14 major market jurisdictions - the eight capital cities and six state regional markets - on their prospects for growth in 2024.
Queensland was rated the strongest regional market and ranked fifth overall among the 14 market jurisdictions.
It ranked in the top 4 nationally on three of the five metrics – sales activity, short-term price growth and infrastructure spending. It also produced solid ratings on vacancy rates and rental growth.
The combination of its solid performance across a range of measures has resulted in a strong overall ranking – and gives substance to the expectation that Regional Queensland markets will be among the nation’s out-performers in 2024.
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