A mentor discusses the Australian property market in August 2022, covering mortgage strategy, immigration policy, and regional dynamics. Rents are rising while vacancy rates tighten. The speaker weighs fixed versus variable loan rates and explains how investors should buffer against downside risk.
Chapters
Hello, everyone. It is August 2022. We have got over the middle of the year. We are in the downslide to Christmas already. There's people already counting down how many weeks till Christmas. Oh, my goodness. There is so much happening and it seems to me that there are a lot of questions out there. So I welcome you all to get in and ask your questions. If you want to come on live, you can hit the link to do that, but put your questions in the chat as they come up, because I know there's a lot of things that are going on and I've been pretty busy in trying to work out what's happening, not just now, not just next year, but in the future as well. So I've just come off a webinar about what the millennials and the Gen Zs and Alphas are going to want in the year 2030. So it's pretty interesting to see that there's so many conversations and questions going on about that right now. So I want to, I guess, address some of that and just make sure that we've got all of the information that we need to make sure we've protected our downside whilst we actually start looking at how we can improve the upside for us in the future. Now, I know there's a lot of media out there about, you know, inflation, interest rates. What's the RBA doing? Is it going up? Is it going down? You know, we are definitely in a lot better position than countries like the uk, for instance. They, at the moment they're expecting inflation to be 13% and potentially as high as 18%, which is just incredible. They've also, based on the fact that this winter they're expecting fuel shortages due to the Ukraine, Russian war, that the annual fuel bill for heating a house will go from 3,000 to 7,000 and potentially up as far as 10 and a half thousand. So we are definitely in a much better and stronger position than most of the countries around the world. And it's great to see also that, you know, we're in a place where we have seen some of the downturn already in the market, and not just seeing that downturn in the market, but seeing a little bit of optimism. You know, I'm currently working with a couple of clients who are purchasing properties and doing investigations into properties in. Well, just this morning I spoke to someone in Brisbane, someone yesterday in Adelaide, and in one of my mentoring students in Melbourne and one of my done for you clients, also looking at, I think I looked at six properties that buyer's agent sent me through to assess for them on their behalf yesterday. And gee, you know, there is some pricing pressure on these. The sellers at the moment, people who are selling are being realistic about their prices. So it's good to see that people are out there and buying. And the other thing is as well, you know, just in the last week if I think about my mortgage business, you know, I've spoken to quite a few first home buyers and by no chance they're actually quite optimistic as well. I guess, you know, we're listening to the media and they're just, you know, on making the decision to buy a property, someone who I spoke to and had a look at their property in Geelong purchased last week, someone who's looking at buying around Melbourne and another first home buyer. Oh, another buyer up near the north coast of mid north coast New South Wales. So these are just deals that I've looked at in the last week or so and first time buyers as well. You know it's interesting when we've seen not just 10,000 of those first home loan deposit schemes that came out, the first home guarantee scheme is going to bring 40,000 extra people and you know, that's with a 5% deposit. And I saw one of the loans get approved yesterday, you know, we put in the application, the valuation on Friday and it was back by Tuesday, formally approved. So you know, things are moving fast and there is definitely a degree of optimism. Now the interesting thing and the reason I'm telling you this is when I put my mortgage broking hat on, which I still have over here somewhere. Here we go. Put my mortgage broking hat on and act as a mortgage broker for a moment. What happens as a mortgage broker is you get to see the market about six months before you start reading about it in the paper. So you know, you'll start getting people inquire about, you know, what's my borrowing capacity and if my property's at the most it's been valued at for quite a while, what's the equity that I have that can pull out and how much can I then subsequently borrow? And these conversations start now, it usually takes about 150 days I found, you know, between that first kind of, yeah, should I think about this through to I've got the money and I'm putting it, you know, offering on a property. Now I've been a broker for 17 years so I kind of, as you can imagine, study the stats quite a lot to see what that timeframe is. And what I've seen is that, you know, when there is A little bit of apprehension. We obviously saw some investors move back last year, but there was a huge amount of home buyers in the last couple of years buying first. Home buyers kind of lost steam at the end of last year. But now we've got these increased caps of what they can buy up to, which is realistic for some, some of those significant capital cities. But those significant capital city caps have fallen over into, you know, the Wollongongs and Newcastles and Geelongs and you know, so these bigger regional satellite cities that, you know, I've been talking about for at least last, oh wow, six years, I think I did a webinar with Terry Ryder from Hot Spotting about six years ago on these satellite cities. You know, there's the opportunity there and you know, when I see these, these kind of inquiries, the investors are back and the investors are putting an offer. The deal I looked at this morning in Brisbane, the Melbourne and Adelaide ones yesterday, all investors. And so, you know, I'm, I'm seeing this people who are taking the opportunity. So on one hand there's the media going doom and gloom. On the other hand we're starting to see like for instance, clearance rates go from 60% to 71% in Melbourne and more stock coming on the market. We're moving into Sports Spring. We've got people who have kind of been through all of this before going, yeah, you know, this is the time that wealth can be made. And as a broker, I would say that these increase inquiries that we're getting at the moment, we'll have equity releases within, you know, six weeks. People are actively looking at properties come September. You know, that gets us through to about November buying period. November, December, flat flurry by January, February you're going to start seeing in the media, oh, the market's back. Maybe you should be looking now. And really it would, it's turned. What's also very interesting is John McGrath spoke to his, did his annual report this month and has talked about the fact that we are down, you know, we're at the bottom of the downturn and on the way back up and you know, it's usually an 18 to 24 month kind of down and up process. If you look historically around the world, around the world, around Australia, over history and how long it's taken and I suspect it may be a little bit sooner. And you know the reason why, because I told you this last month and that is immigration, they're coming and we're also, you know, with the increased costs and distribution, China's being shut down and we still don't have the Chinese uni students back. Pete, speaking to Peter Kalizas last month from Perth, Perth, Adelaide, where he's a professor at one of the universities. They're not expecting to have enrolments from China back until January 2023. So we're starting to see, you know, the fact that we're going to have pressure on all of these rental properties as well. One of my mentoring students yesterday was talking about the proposal in front of Byron Bay Council at the moment is going to put a zoning in place place around Airbnb accommodation, which essentially means that the proposal is that you can only have 90 days a year if you're not in like zone one beachfront. And there's a lot of properties being sold in some of those areas. And you know, also, you know, I'd like to always look at history and see that history has repeated itself. But I'm always got a watchful and wary eye around, you know, where things are going and what is going to happen in the future and have things changed. And you know, I was very skeptical about the rise of the regions and I think we're now seeing and the media is now actually reporting that it is the retreat from the regions. So I've got a lot of information, I've been to quite a few webinars and information sessions both around Australia and around international movements in finance, it's, etc. So without further ado, I might just kick off and get us into that media share my screen so that you guys can actually see this presentation too. So let me know that it's coming in loud and strong and you can see my screen. That'd be really handy and that way I can make sure that we are seeing things. So give me a thumbs up guys or something just to indicate that you're alive and kicking. I know this doesn't always suit all people and most people actually watch this on recording, so let me know they're coming through that and strong just so I can see your comments and I will get going with the, I guess the wrap of the market. So let me just turn my video off so, so that you can see the screen. So a quick little wrap here, guys. Obviously inflation figures are high. They're the highest in 30 years. As I indicated previously, we've got 13% being expected in the UK up to 18%. We still have very low unemployment figures, the lowest since 1974 and we're getting some pressure on wages now. My 14 year old son has just applied for his first job. And it's incredible. The hospitality, you know, retail industry at the moment, they're throwing like $17 an hour at some of these kids. And, you know, this is just extraordinary because they can't get people to be dishwashers or, you know, there's so many other opportunities out there. I'm speaking to a lot of clients at the moment from a mortgage perspective who are being offered roles and are considering taking them and just want to know the implication of probation or changing industry. So things to consider, important things to note. But know that, you know, we are seeing some wage rises now that's not going to help us with interest rate rises because interest rate rises are supposed to take money out of the economy and wage rises puts money back into the economy. So bit of a wage spiral issue. But I don't think we are going to face this as soon as significantly as has happened in decades previously. And that is because of the immigrants that are coming who are going to start coming into the market. So watch that space. Now, I put down here the Queensland land tax changes, the New South Wales stamp duty law changes and Victoria tenancy laws. Now, this is, and let's just add to that Airbnb zoning potential legislation change. Now, the reason I mention these four things, these are things outside of our control. These are things we make all these great plans, we put everything in place and there might be something like the Queensland land tax changes that come into play that actually prevent us to not grandfathered, which means that if you did own a property beforehand and you're under one lot of land tax rules that you can just keep going along with those. These land tax rules mean that they're retrospective. So if you own a property in Queensland and you also have subsequent properties in other states, it's not a double tax. But what they do is they take a proportion as the proportion of the Queensland land value of your other assets. And I've seen clients whose land tax is going to go from like $1,000 to $7,000. So significant changes there. Can't plan for these things. Who would have expected the money grab? And very clever. Hats off to the premier. You know, these people aren't voting for her, they're interstate investors. So she's not going to have any backlash other than potentially Queensland people who are going to start selling their properties because they can't afford that cash flow hit. However, with all that in mind, is there that really many people who have multiple properties? And the answer is not really. So I'm not seeing a huge retreat from Brisbane at all New South Wales Stamp duty changes first Home buyers affected straight up on these. But that could change. And that's what's really interesting about this is that they may just run this as a case and then go forward. And essentially what it means is instead of paying, you know, $30,000 on him million dollar property stamp duty, you might pay a smaller amount and then subsequent annual amounts and that gets moved along with the new owners of the properties. Victorian tenancy laws once again, huge amount of laws essentially, you know, can have pets, can paint the place, can do pretty much anything without retribution. So there's a lot of things that we need to be aware of that we can't always plan for. So strange legislation changes. And I just want to bring that to your attention because this is why we have buffers in place just in case or we have a property that's a typical property for the area. So when you do need to sell it that the majority of people wanting to buy it are the people who want to buy that type of property. So it's not about buying a studio unit in Lithgow, it's about a three bedroom house in, you know, Malka Bat, for instance. INTEREST rate RISES so yes, we've had another one. Here's the thing, right, We've had quite a few and we've got some predictions now. Last month the prediction was it's going to go up to about 3.15 by the end of the year. This month they're saying around about 2.5%. So if you look at that, it's probably about a 0.75 extra that we may expect going up in the next period of time till the end of the year. But they're also, you know, a lot of the economists now saying too far, too fast and they're expecting rates to drop by mid next year. So it's really hard to kind of look at this. I always look to New Zealand. New Zealand's always six months ahead of us. Their interest rates are quite high. They've pulled a lot of the heat out of the market there. You know, there's going to be a grab for immigrants across the world. But as I showed you last month, a lot of those high income, specialty type of visas are heading to Australia. Number one is Dubai or the United Emirates and number two is Australia for where those people are coming. So lots of things happening with rates. I've had a lot of conversations about people with people who are worried about should they fix or not. And you know, at the moment it really has to come down to a personal decision. The fixed rates indicate that you might. Well my study over the last 30 years, and I had taken a lot of that information from Mark Burris from Yellow Brick Road when he had done a previous study about, you know, how often the banks win when you take a fixed rate compared to variables. And this is not specific advice, obviously all standard disclaimers are in place about this being general information only. And please speak with your specific circumstances to your mortgage broker. But you know, the banks usually win. They've got, you know, 2030 economists sitting there trying to work out what they should do with the rates so that they make money for their clients. And you know, it's. They usually win. When you're hedging variable versus fixed and if you're in doubt, maybe you want to split the loan. You don't have to have it all variable or fixed. Just be aware there's only two lenders that let you have a offset account against a fixed, fixed rate, which is always great. And one of those is Adelaide bank, another great lender. And the fixed rates at the moment that I'm looking at aren't that competitive, especially if you think that the rates could come down. So you may have six months of, you know, making a bit of money, so saving, but you potentially could have a downside of years. So just be aware and please speak if you're thinking about fixing your rates to your mortgage broker about that. Now I just wanted to bring this up to talk to you about the long term rate. So if we go back to 1990, you know, 16% that we've all heard about, 10%, et cetera, et cetera, and pretty much variable and fixed lending rates were the same until we hit the beginning of 2020 when these fixed rates were actually quite a bit lower. You know, people were fixing rates 1.8, 1.9s, lucky them. And if we look at this from the last, this period between 2021 and 2012, you know, this kind of shows us a median of around about 7%. We're pretty much a little bit higher than that because of this earlier period. But 7% is considered to be, you know, like the long term average rate. And if you look at where we are at the moment, you know, they're talking about RBA being around, you know, 2.5 at another 2.5% on top of that to say what the lenders are going to charge you. So 4.755%, it's still a lot less than what we've had in the long term. So just be aware of that as well. Obviously inflation has some effect on that. What's happening in the market? Pretty much all the market except Adelaide has really come off a bit in the week. Don't usually look at weeks, don't really interested in looking at months. Looking at the 12 month change, we can see some quite considerable Brisbane and Adelaide market charging ahead, which has been fantastic year to date. In the last eight months we've seen that Adelaide has definitely steamed ahead as well. So the markets are coming off. I do believe all indications show that Brisbane is coming off quicker than Adelaide is. And Adelaide, as I've shared with you, my little secret sauce, having tried to investigate and ring up lots of immigration lawyers, they are actually talking to people about moving to Adelaide because Adelaide is considered regional and you get more points towards your permanent residency. So if you get into the lottery with those points, you've got more likelihood to actually have a chance to become an Australian citizen faster. What happens when you're Australian citizen faster? You get to borrow money. And when you get to borrow money, what happens? Property prices and pressure go up. So I think Adelaide still has lots of legs to go. And although it might go through a tiny little plateau, as soon as the people who've moved there and lived there and loved being there for the last 18 months get there and then can start borrowing, I think you're going to see kind of a bigger move in the Adelaide property market. Something to watch. As I said, RBA is talking about, you know, continuing to tighten, but they're also, when you talk to the cba, they start talking about the fact that they think that there's going to be rate cuts coming ahead in the second half of 2023. So a lot of cross information and I think that the RBA probably took it a little bit too long to come to the market. There's apparently going to be an investigation into the fact that the, the governor of the RBA did say, don't you worry, I'll look after you and we won't be raising rates to 2024. And then he did in 2022. And arguably there's a lot of first time buyers with a small amount of equity that potentially could be feeling the pinch on that, especially if they've used all their savings to get into that property. But so there's an investigation going on. The fact of the matter is that, you know, I think there'll be some protection mechanisms put in place if that does come about. I don't think we're going to see a mass of, you know, first home buyers losing their properties. They've done enough to try to get them into their properties that, you know, it'll be interesting to see what happens. But, you know, here's the rates. Some, you know, a lot of people talking about rates going up. Then we've got some of the economists coming out. CBA was the first and now there's many coming out saying by mid next year rates will dropping again. So watch this space. Now this is really interesting, just putting the context of the market into play here. Alan Kohler, I've probably seen him, he's from the Eureka Report. Probably seen on ABC doing finance news every now and then. Just the context. You know, Sydney housing values are down but the drop comes up after a 42% surge from 2019. And I've got an interesting little presentation here, but slide coming up. It shows, you know, the market and when you bought and what it looks like. But you know, we need to really put this in context. And yes, Sydney has been the fastest moving market and yes, you know, we've got median house prices $1.6 million there at the moment. But it's interesting the trajectory has started speeding up and that since the rate hikes as well. So that'd be even faster now, I'd suggest since the last two. And while housing values are trending lower in Sydney and Melbourne, Adelaide and a little bit Brisbane are really still seeing the positive responses. And you've heard my thoughts around Adelaide being a little secret sleeper opportunity. Now, immigration. The reason I kind of looked at this and why it was interesting to me to share this with you is that when we look at some of the data and prop text from realestate.com and we just look at how people are actually researching, you know, what they want to do. You know, a lot of people are at at the moment, you know, there's an upsurge of people looking to rent in particular. This is a trajectory or gradient is a lot faster than this one. But a lot of people looking to rent in Australia. But here's the other thing. You know, we've got how many visas, we've got nothing happening here. And then all of a sudden we've got these arrivals and they're coming up. We were getting like 180,000 people a year that were coming through at one stage. They're now talking around about 240,000 coming through. So this is large. You know, if we look at who's the most, we've got the temporary Students and the permanent skilled residents. So, you know, these permanent skilled residents, these guys, the temporary students that have come back a bit. We're going to start seeing these skilled visas come up, as I said, number two on the list after the UAE of where people want to move to. And then we've got the temporary and the temporary work visas. So we're starting to see this coming up. So just be aware of that. And what's really interesting is just seeing, here we go, just seeing what, you know, where people are coming from. You know, we've got New Zealand, America, England, you know, where's that? Hong Kong, Singapore, Singapore, India and Hong Kong. So, you know, we've got all of these groups that are starting to really look at, you know, coming back into the. The, into Australia as well. So some really interesting stats here. A lot of people from China are looking to rent when they're doing their online searches on realestate.com so by far, you know, India and China, this kind of rental market is looking big and India to buy as well. So, you know, these are really interesting data points and the reason I shared them with you is because I think we just need to be aware of, you know, what, what is coming and where people are coming from and potentially buying a property in an area that they would like to live. And you know, according to the Department of Home affairs, the number of international students applying for visas hit a record high in June. So, you know, we're starting to see the fact that people are really searching for rental properties. We've got these visas coming through, mark my words. I looked at a Melbourne property yesterday that if I'd looked at what, three, four months ago, the rental yield would have been 2.2%. It's 3% at the moment. And there'll be more pressure on, on these really good quality properties as well. Hey, let's just remember the sensor stuff is out, which is really cool. I'm trying to make sense of some of the sensors I've got. My suburb selector software is being updated with it at the moment. I come across this company called ubis, which is kind of an interesting company. They have said, and I'm not going to waste a lot of time on it to be honest. They, but they have actually said that, you know, you can do these great census snapshots. I've had a few issues in doing it but you know, I guess the thing is around it is that if you are looking at some of these, you know, areas can't even spell now. New town, New town Probably. Let's go New South Wales, Sydney. There is some really interesting information that you should be able to pull up around these areas. And I've tried to use this a couple of times and I've got to be honest, it's a little bit touch and go, but every now and then it works and it says, I've selected an area and the information comes up and sometimes it lets me save it and sometimes not. But when the information does come up, you can go in and you can actually pull up that area. So this is the essay 2 area for that area. In 2001 you could get down to an essay, higher to an essay one area and then you can actually have a look at reports. So you can have a look at how Newtown, on this essay, Stanmore, et cetera, actually compare. So this is the, the key information that's come through. This is around, you know, the greater capital of Sydney. Now I don't necessarily think all of this data is right because I definitely don't think there's 200 million people in Sydney. But it is, it does come up with some really cool information regard population, housing characteristics, home life. So whilst that just sits there in the background and comes up with the numbers, I think it, it just gives us an idea of how you can start pulling this information out and getting a better idea of what's actually happening. What I like about this is it gives you, you know, the idea of, you know, where the, the biggest demographic or biggest numbers are. So, you know, biggest age group 25 to 39. So semi detached apart, semi detached properties and apartments is big in Newtown. And then we've got, what have we got? Houses with a mortgage, separate house. So not that many separate houses in Newtown. We've got born overseas, quite a significant amount. So there's a nice graphical and you can go to things as well, but you can actually have a look at some of these changes between the census data, which I think is really interesting to see. You know what those changes are. So people with personal incomes over $100,000, a more affluent type of area. And what's this biggest one? Family households. So another interesting kind of little demographic for you to have a look at some information that might be of interest. It's called urbis. Go there and check it out. I think it's a little tool that I'm kind of playing with at the moment. But yeah, let's just see what's happening. As we know around about 30% of people are still renting. Most of them rent houses and the Reason why that's important is that we want to have the typical property. So if we do need to sell, if rates get harsh, you've got not the most special property in the street that people are looking at and going, I don't really want that one because it's a little bit unusual. So tell me if anyone's got any questions, please, you know, pop them in right now, because I'd love to be able to, you know, answer questions if you've got them coming up, because I know that there's always questions coming up. I'm going to be doing a bit of a deep dive with my mentoring students in the next week or so on this. This is a new phenomenon. The millennials who were born between 1980 and 1994 are almost as big as the baby boomers now. So that's kind of interesting to see that this is a real rising demographic. The other information that I'm just working with is what the Gen Zs want and what they're planning to do when it comes to property and accommodation. 75% of them say that they want to have their own home. And a lot of them, although they've got this whole, you know, I want to be satisfied now, they're actually quite astute and conservative in how they look at things, the environment. They're astute and conservative in their savings. They want to stay at home longer, save money, buy their home. So I think there's some real interesting demographics that we need to be monitoring around in the next 10 years. The type of people who, A, we're going to be selling our properties to, B, who are going to be buying the properties and renting the property. So let's. I'll keep a watching brief on that and double down mentoring students and come back to you with some of the insights. Okay, so this is all good. Michael Matusik is fantastic commentator. He's a numbers man. I love the numbers people. And we always hear about what's happening in the market. And, you know, this is kind of interesting because, you know, 20% of investors are actually rent vestors. So I was a rent vesta for like, I don't know, 10 years. I bought, bought properties and put renters in there. And I went and lived somewhere that I couldn't afford to buy, but loved living. So that was a lot of fun. Only 30% of investors actually own their own home. So this is interesting as well. Only 4% of investors have over four properties is about 87,000 now. They stop counting after that. We had seven and have just sold one, which is exciting but you know, so I don't know, I think they're down to like, if you got six properties, I think it's down to like 11,000 people or something. So anyhow, interesting age groups, between 35 and 55, the majority of the age groups and let me get rid of my face again. And over here, what's really interesting is the value of the investment property. So 28% is under 500,000. So and if you look at this, you know, we're looking at over 50%, well and truly under 750,000. So you know, the typical person has a mortgage. The typical person has one investment property. The typical person, you know, they might be a bit older in life. The typical person is, is actually residing in New South Wales and, or Victoria. Makes sense. They may not be investing there. But typically my experience is people are parochial and can't think about being geographically agnostic and they buy in the area that they live and typically we've got people buying under 750,000. So if you're trying to minimise your risk and think about where you wanted to buy a property so that you could exit it in the future, then you might look at where the typical investors are buying. So interesting perspective and as I said, just going with the typical. Australians usually resident by household type. Most people in 2016 census and the 2021 census are mum, dads and kids. This is like it makes up 11 million percent of the population and then there's couples. So what this says is that, you know, a two bedroom property, minimum really. And you know, still there's been a lot being talked about, you know, these lone person households. It's still only 10% of the population, which is interesting. And the group living, shared housing, et cetera, still quite a small amount as well. Once again go with the typical. What have we got? Houses. So you know, what are the typical properties that people want? Houses. What are you, who are they? Families, you know, well, how much of the properties worth less than say 750,000. So we kind of getting this kind of what's the typical property that we can build up and make a decision about how we buy. So here's some more musings. Australia's overall population was resolved, Revised down by 50,000 between the censuses. Now we know that census done in 2021 was, you know, pretty much in lockdown and we didn't have a lot of, we had a lot of people leave the country, especially students. Both Victoria and New South Wales were Revised downwards by 100,000 each. So, yes, we did see, you know, a retreat to other states. But what was interesting, while Western Australia, South Australia, Tassie and ACT went up, Queensland stayed the same. And I think there's a myth or a perspective perception that a lot of people left and went to Queensland. What's interesting here is that the populations, according to the census data and Matusic stayed the same. Now, according to Louis Christopher, despite the easing in locations, the national vacancy rate remained steady at 1% in July. Now, this is interesting because we look at one of the filters in the suburb selector software that if you're in Location Masterclass course or the Ultimate Guide to Renovation course, you'll know we look at a filter around about 3%. So less than 3% says that there's more people looking for a property than properties on the market. Yes, this is what we want because we want our place to rent quickly and for more. So 1% just means there's a really tight market. He went on to say rents in capital cities are also on the rise, up by 1.2% over 330 days, resulting in 17% increase in the past 12 months. Now, I know with some of my investment properties, we've gone. We're not jacking up rent for people who are there, but we've gone to the market with some who've moved out and incredibly, you know, we're getting that 15 to 20% higher and we're getting rents higher than what we're asking for. So, you know, there's a real yield push on rental properties. You're going to get a better yield, which is great because interest rates are going up. So your cash flow, I think, will probably improve rather than go backwards. But the interesting thing about that is that I think there's going to be a lot of instability in the stock market as there has been, and people might. And we know crypto, a lot of people left crypto and been a bit discouraged about the drop there, that we'll probably see people start chasing yields in the property market. So I'm again quite positive about this. Christopher went on to. Well, Louis went on to say rents for houses in capital cities increased 15% over the same period, while units were up 16%. Now, this is interesting because we never really get some positive news about units. So this is good. They've done a bit better in the rents going up. The average rents decreased slightly in Hobart, Darwin and Canberra. Interesting when you put these patterns together. Right, more people moved to South Australia, Tassie and Canberra but the rents are coming down. So just think this through. Does this mean people are moving there to live and they're taking rental properties up off the market? Are they buying homes or they, or are there more houses available there? Has there been developments that have, you know, bought more properties onto the market. So there's more support. But the fact that there's not a properties coming off the market because owner occupiers are moving there and taking them out of the rental market, this tells me that people are moving to this area. But there's not a huge constraint around the supply side. So if rents are coming down, you know, that's kind of a little bit of a quandary that I'd like to investigate a bit further. And the only way that I think that can happen is that there has become a larger amount of supply. And I know in Canberra there has been huge, huge growth in like numbers of apartments and blocks of apartments that have gone on. We've evidenced the rise in overseas arrivals is starting and it's going to put demand on. So as I said, you know, the students aren't coming to January so this starting process is definitely on its way up. More musings after COVID lockdowns fueled record breaking growth rates among many of Australians regional lifestyle areas New South Wales and Queensland's beach and country hotspots have been the first to register a quarterly fall in house values according to CoreLogic. You know, I've always talked about, you know, I like the CoreLogic Pain and Gain report. It shows us that, you know, we're always consistently looking at houses in capital cities that have made people the most money. And I know there was a lot of movement and a lot of speculation about going to the regional areas. And you know, my premise is that capital cities do better. A premise is a working assumption until it's proven wrong. It's not a mutable law of or anything. And it's still holding for me. You know, there has been a little bit of that movement that we've seen. Population movement, interestingly enough. Pippa, the Property Investors Council of Australia. No, that's pica. PIPPA is doing a survey at the moment. Please check out in the Facebook group because I'd love for you to contribute. It gives us a really great idea of what's happening as a snapshot. But one of the questions I noticed when I was filling it in was did you move to the country and are you thinking about moving back? One of the other interesting things that I learned on a webinar this Morning about what is happening in other real estate markets. And I guess it's really driven by the remote working paradigm that we've seen over the last two years is that they are doing a vacancy office vacancy rates in London. And one of the recent ones came in and said how, how often or how long do people actually work in the office? You know, in a week and at the moment it's about one and a half days a week is what the average worker is doing in the office. And when surveyed 85% said that if they had to go back to five days at work they'd resign. Now what's interesting here is they're talking about how these properties can be repurposed and I'm hearing, you know, these commercial office blocks can become hotels or make them apart. And having just seen a number of reports on properties that have had conversions, the conversions from commercial to residential don't always go that well. And I've just seen like subsequent issues with maintenance and problems because they were never built to be residential. And so I, it's, it's going to be an interesting thing to explore to see, you know, all of these we talked about three or four years ago. I think I ran a webinar about what would they call the dark towers. All of the towers that were in the city that were dark because there were overseas investors buying them and putting their money into Australia and even the electricity and the power hadn't been connected. I think the dark towers phenomenon now is going to be office buildings and people are going to have to try to get a little creative about how they develop them. But my word of warning would be that I don't think that you should rush into them even if they seem very cheap because I think it might have ongoing maintenance issues. And having just sold my very first property after 21 years because of ongoing maintenance issues, it was a unit and subsequent issues with a significant renovation of that block of 18 just resulted in it just not being feasible mentally for me to continue fighting the fight against, you know, variations and issues that resulted in that. So you know, interesting to see this information coming up because a we've got this whole, you know, return to work phenomenon going on but not that many people want to return to work full time. So I think that's an alingus to, you know, the typical three bedroom property becoming three bedroom plus one or three bedroom plus studio. I put in the youe Property Success Facebook group, a link to an overseas group that are doing using actually recyclable plastics to create like little studio apartments using 3D, printing about 35,000 US and getting them done in like 20 hours. So I think we might even just see like some pop up little offices in the backyards that could be possible. So lots of excitement. Once again if you've got any questions I can see you watching but if you've got any questions or comments or you want to love it up. So I'm not just sitting here talking to myself. That'd be great for all you who are watching on recording. Hi. I hope the future's bright for you. I'm looking forward to the future. At the moment I'm heading to the Gold coast this weekend. I'm running a mindset money course on the Saturday. Lots of surprises which I can't tell you in case some people are watching and taking the mentoring clients Versace for dinner on Saturday night and spending a full day at the mentoring clients on Sunday. So I'm very excited to get back and see people face to face. So yeah, lots of things to look forward to now. Typical Markets Ms. Easy. I can't remember who Ms. Easy is. She's from. She's an economist rea Typical Markets with a higher medium value tend to lead the broader market when shifting through different cycles. After recording some of the strongest value growth throughout the COVID period, each of these areas now has a median price value in excess of a million dollars. Now the reason I put this down, as you've probably seen in the past I tried to look at not just one number of the median price in each city but I looking at the bottom percentile, the top percentile and the mid percentile. This just verifies that the top percentile usually moves first and then goes up first and comes down first. And I've seen all of those except for Adelaide coming down at the top end. And the other thing is they don't go as they don't come back as much as the mid or the lower end. You know they go up a bit and come back a bit but they do go first. So that's, it's interesting to see. Yeah just more information that's come out from census about the property owners, people who own investment properties by age group. It's interesting to see by age group the ones that own investment properties. I like this data hence I've given it to you. The typical property investment, Vesta has a portfolio that's worth less than a million dollars. Most people that own an investment property only have one. Now this is interesting. In 2018-19 a little less than 60% of tax filers reported earning rental income also reported an overall rental loss. That is 6 in 10 property investors are negatively geared. So this is just saying, you know, what is the state of the market? Remember, interest rates are a bit higher and we've got the predominant investors in Sydney and Melbourne. What does that mean? Well, that means that you can. You're probably in an area where you're getting a 2.3% rental yield and, you know, interest rates were still higher at that stage. So this probably came down. And we'll see the numbers that come out in like 2020 from the ATO and 2021, we'll see this come down because of interest rates. But I think we'll start also seeing, you know, the rental pressure. This, the number of people who are negatively geared, I suspect will come down in subsequent years as well. After falling to less than a third during 2020, the investor share of new lending has picked up. So as I said, you know, there's usually the home owners around, you know, 30, 40%. There's the first home buyers, 15, 20, 25%. And then we have these investors. Now investors kind of come from 40% crashing down to 25% in the period 2018, 22. They're starting to come back up. And this is important because this means they're back in the market. They're putting investment properties in the market. This period here was definitely dominated by owner occupiers just changing into a new home. So investors are back, just in case you're wondering. As I said in the beginning, and this is interesting as well, it took me a little bit to understand this, but I've got here a curious feature of the data is that sellers appear to prefer to hold onto a property rather than accept a price below what they paid. Now, this is up until July this year. And essentially what this means is if people have bought a property, how many of them actually sold at a loss? And you can see here, you know, if you bought at 450 and the market went up to 500 and, you know, you, you rode that great freight train and now it's dropping back to, you know, 480, 450, 430, 420, you're actually going to hold on until when you're ready to sell that you get your money back. So it's more like a psychological thing. I bought for 450. I'm not going to sell until I get to 450. And this is where you see that, this high amount going, oh, my Gosh, thank God I can get out now and get my money back. Fact of the matter is as we know most people are negatively kid so the property is actually cost them a bit of money. And I spoke to a young investor in Perth just last week and we looked at a property he bought at 450 and it's, you know, he bought it 10 years ago and it has done nothing and it's gone backwards and he's hoping maybe he could get 450 for it again. And the same period of time, you know, a lot of my clients in the ultimate go to renovation or mortgage clients have bought properties at 450 are now worth 900 to a million. If they come back to 850, you know, they're still really happy and ahead. So you know, buying that typical property, being really strategic about where you buy, I just can't emphasize it enough. And the reason I'm pulling out all these reports from all these different places to substantiate this is to show you that if you put all the data together and read the patterns, buying the most typical property, best property you can afford, when you can afford it, if you can afford a million dollars, is that to 500,000 properties in sub areas because it makes you feel like you're diverting risk because if one goes up the other one could go down, for instance. Or is it about buying the million dollar property in the best area you can that has, you know, price pressure, that's proven that it's had growth potential in the past and we'll have it potentially again. So you know, I'm just trying to give you the information around, you know, what we're seeing with, you know, price growth, what we're seeing in houses versus units and why you might want to consider and just following what has always worked in the past. Now I'm going to put a disclaimer on there. Yes, we have seen units do a little bit better and I'm, I just think that because we've had these supply chain issues that have come up and that there's not. There are a lot of approved unit blocks that are still being completed. But there is a lot of pressure and a lot of developers at the moment, you know, pushing their developments down the track until cost of supplies, trades, et cetera get better. But I think that when we see a lot of the immigrants come to Australia, units may actually get a little bit of a push up from that. So it's a place to watch. But you know, long term houses outperform units, land Outperforms, not that much land and areas where people want to live and having enough space. And I think this, you know, remote working with the extra room is something that we should all look for. So a bigger block that you could potentially put a little, you know, studio on the back might be something that I think we're going to see start moving into the future as being a bit more traditional in the way that we see some of these blocks and properties get sold. So what else we've got? Yeah, more units make losses than houses. This is just look interesting information. This is from locations. No from ds. Dsr. And this just shows us like the online searches Jeremy. So yeah, online searches more coming down. Brisbane and Perth, slightly up, Adelaide up. So you know this, Brisbane and Adelaide. This is just showing where the interest is. These haven't this, this kind of hasn't turned as yet. So something to watch year on year rental growth. So everyone is pretty much going up except what we're seeing here in Canberra and Darwin. So this is something to watch. And you know I'm thinking that these guys are going to start turning soon too. Now actually this is a little confusing. I don't think I'm going to go through this now. But this is just something that as a mortgage broker we had to go through in training recently around making sure we have conversations with people about what you know, there could be changes in interest rates and if they're trying to fix a rate and they don't lock in their rate then it goes up higher how much it could potentially cost them, what the benefit is. So I'm not going to go into it. Speak to your mortgage broker or ring us an investor's choice and we'd be happy to have a chat to you. But this is kind of interesting. What I found here was the basically the repayments and expenses and this here is like for a $400,000 loan, the rates increased by half a percent. Subsequent annual repayments over 24 months they increased by $6,000. So we're kind of seeing here, you know, as rates go up how much you know this is going to be cost people. This here is about living expenses, two adults and two kids over a two year period. So what would that look like if interest rates went up by the half a percentage? So we went from two and a half to five percent. You know we're looking at what's that a $6,000 increase if we went from two and a half to 5%. You know, with the expenses of inflation affecting us as well, you know, we're once again, you know, looking at quite a significant amount there, about 9,000 and then the total repayments, you know, the total costs that it would be costing us. So yes, if interest rates go up, it's going to hit our hip pocket. We also know inflation is going up. Broccoli is still $9 a bunch a kilo. So we know that there is actually some costs that we need to be aware of and factor in when we are looking at potentially buying. There is good news though, and that is that most people over this period of 2020 to 2022, these savings have just been incredible. And the increase that you can see here on how far people are ahead on their mortgage repayments, we really have, you know, batten the hatches and protected our bottom line as individuals and households, which is good. As I said, John McGrath from McGrath Real Estate Network, you know, he's really talking about the fact that, you know, the market he believes is now looking at corrections and improvement. So, you know, there's a lot of starting to see, see information in the media. You know, rental listings hit record low. More landlords turning to short term leasing. So this is an interesting subtext here especially because when we look at what's happening in Byron at the moment and the fact that they're trying to restrict Airbnb accommodation all year round. And one of the main reasons about that is that the fact that, you know, the locals can't live, afford to live there A they can't rent because the rental properties have been taken off the market. And you've got, you know, people who are retail, hospitality, medical, who can't afford to live in the town without they have to service, which creates real problems for the town. So something to watch here. And you know, this, we're starting to get the, some really good news stories as well about, you know, property investors are making money. I just, I've added this in because I thought it was kind of funny. You know, we see the market and it's where most people actually buy in the market is they're actually buying up here. And the smart money is actually when the market starts taking off. This is where I think we are now. We're in this stealth phase. And to the extent, I mean, I've been talking about this for three months, I reckon we're almost in the awareness phase and people are starting to see it. There's going to be a little bit of doubt but then, you know, media gets involved. Oh, immigrants are here. Oh, everyone's getting 20, 30% more rent, you know, everyone starts buying. Oh, are we here? We at normal? You know, could we come all the way down here potentially. But we've seen historically, you know, there are market moves and usually that market kind of timeline, five to seven years. The peak to the trough is usually, you know, 18 months to 24 months, you know, when it does come down. So I think we're in a period at the moment where we're actually coming into this area and there's an opportunity for people to make money. So just some quick numbers. The Heron Todd white data came out yesterday. As you can see, we're starting to see these, this side of the circle coming down. The orange ones, the ones that have moved since last month. So now we've got Sydney in a declining market. We've got starting to decline here and peak of the market. I've just helped my parents sell their property in Dubbo. I'll have to tell you about that another time. And how I got a free ensuite but renovation. But you know, they just, just absolutely thrilled. It gives them a next chance in life to start the next phase which is to move into an interestingness. They call it retirement village. In actual fact, it's more like a cruise ship with like 10 activities a day, which I think they're really looking forward to. I just did this just so you can see where we were this time in April was like the only market that started to decline back here was the Southern Table and Highlands. And so, you know, it's interesting just to see where the market is. It started to decline in April. It's still sitting there. So starting to decline. The only one that's kind of moved through this cycle was approaching the peak in April, Sydney. And it's come through quite quickly. So it just shows you a little bit. Also differences. Some of those regional data that's going to come through takes a little bit longer. Less population, less sales to substantiate it. As I said, I'm really excited this weekend I'm heading up to the Gold coast. Your way to wealth. I had lots of fun the weekend before last doing an online course, renovate yourself, renovate your wealth about money stories. Watch this space guys, because I'm really. Maybe I even have a website to show. I'm really keen to be supporting people with their money stories and how I can help. I've had some fantastic and fun in the last week or so, doing some vision calls with people and getting couples aligned to what they're really trying to create in life. And you know Getting them in align to, to what they're, they're keen to do together and with their investing, see if they even need to invest. As I said, just some really quick little updates before we, we close off. If you haven't got any questions. And this is just around that PIPA survey. Let's just see, you know, what is happening in the market. PIPA is just such a fantastic organization. They're out there every single day trying to help and support us and they're currently lobbying against what's happening in the land tax issues. So just be aware of that. You know, any information that you can do and help would be fantastic in supporting them. It's good to see also his Jamie vision call with Jamie and her gorgeous husband last week. You know, just getting some clarity about what you, you're interested in doing. If you're interested in doing, trying to just get yourself set up mentally, mindset wise and then functionally what you should be doing, go for it. Hey, and let's just watch Susie here. Suzy, first time home buyer. You have seen Susie over the years and all of the wonderful things she's doing. Well, she bought the house and look at this, she's on fire. So really keen to see what Susie's doing for the renovation and yeah, just, you know, get in here, get active, you know, share the information as much as you can. You're really keen to, to get in there and help people and, and really, you know, share each other's experiences as well. So I am just going to turn my video back on so I can see you. But that's just it for the week or the month. That has been, it has been interesting and you know, I was in the S and P global financial updates during the month just trying to see where they're talking about where finances are going. There's a lot of changes. There's some really interesting information coming through the media and I just encourage you to look at it from a point of view of it just being a piece of information, not the definitive answer or actual synopsis of what's actually happening in the market. Because I'm seeing some amazing deals being done. One client last month bought a property that had been on the market for 950 in the northern suburbs of Melbourne for 785. There is some pricing pressure still available, but I think, you know, we're moving to spring. We'll get more properties on the market. There's a bit more optimism. You know, people are coming off a high base and 42% since 2019. In Sydney is what prices had moved to. So we're really, I'm really seeing optimism. And, you know, if I can support you in any way in assisting you, please reach out. As you know, you can contact us at Investors Choice Mortgages if you'd like to, you know, have a vision call with the Mindset piece. That'd be great. If you want to get yourself ready to purchase and go through the Location masterclass or even the ultimate guide to renovation, I encourage you to go and check that out@yourpropertysuccess.com as well. You know, it's going to be a fun couple of months and I really can see that those people who are getting involved now are really starting to set themselves up for the future. And, you know, rents, pressures on rents, I guess they're going to continue and pressures on supply chain and building costs will continue as well. And that means that there's not going to be that many people out there building and there's going to be more people wanting to be in the properties that are in demand. So determine what's in demand. I hope I've given you enough information as I usually do, and just reinforcing the premises that houses in capital cities and the best things you can afford, when you can afford it, when you have a buffer in place to make sure you can protect your downside is something that you should consider. So thanks for everyone who's been here today. As you know, with these calls, they're the last Thursday of the month. You can shoot me through some questions beforehand. I usually put up a notice in the your property Success club the week before and shoot through questions. Come on live if you want, click the link or just turn up and ask the questions here. But as you know, there's a huge community of people who can support you in the Facebook group itself. So welcome to all the new members and thank you for your wonderful donations. We've hit well over $21,000 now towards kids Helpline. I'm going to continue making that free course till we get to $30,000. And yeah, I'm really looking forward to seeing what plays out in the next few months. It's going to be pretty exciting. Now, next month I am going to have to move this date because I'll be in LA working with my mentor for a week and can't wait to come back and talk to you about what's happening after that. So to everyone who is here, those who are watching and recording, I hope that you have a fantastic September. I'll get back to you with when I will be running the September call a little bit later in the month when I've worked it out. But until then, as always, I hope you have a fantastic month. And here is to your property success. Bye for now.
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