Chelsea's property market update

Foreign.

Money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money Podcast. I'm Jessie Edge and I'm joined today by one of the smartest people I know, the legendary Chelsea Burton. Welcome to Health.

Oh, wow, what an introduction. Thanks, Jesse. Thanks for having me.

No worries. Look, I'd love to pick your brain today. You have a particular passion for the property market, so you tend to have your finger on the pulse of what's happening and I would love to get an update on what has been happening and possibly what might be happening in the near future. So any, any thoughts, Chelsea?

Yeah, well, I don't think the property market's really done what we all expected it to do this year yet. And I mean, it may still be coming, but right now it hasn't happened. We were all expecting that with fixed rates coming off over the course of the second half of this year, that probably prices would start to dip a bit, which doesn't seem to be happening. There's a significant demand in the market in a lot of areas for property, particularly because I think there's been a lot of builders going under and so that sort of led to a shortage in the market. There's a huge rental demand for people who haven't been able to get houses, who need houses or who have been intending to move out to a property that was being constructed, that now isn't being constructed, which is leading to rental price increases as well as property price increases. So crazy.

It's a crazy storm right now.

Absolutely. And whether or not that's going to change, I mean, it's anyone's guess at this point. I think there's still a lot of fixed rates to come up over the course of the next 12 months, that, that may change. There are certainly some areas that are quieter than they were, but there are a lot of areas that are pumping too. So.

Yeah, it's so bizarre. What, so what's happening with the builders at the moment? What's the kind of latest in that with the construction industry?

So there are some builders that seem to be fine. Their houses are ticking along quite nicely. They are being built in the time frames that were expected and that's awesome. There are a lot of construction that has been delayed because of shortages on supplies over the COVID period and the. And the period just after that. And now labor shortages because they're not able to get your basic labourers and carpenters and whatnot.

Is that because we're not bringing in.

Enough people probably a little bit to do with that. I mean, Covid, there was. We stopped people coming into the country. So those people that would have filled those jobs that. That's been delayed. But also because there are a lot of government projects that are paying really well.

Taking up all the construction workers.

And taking up all the construction workers. Yeah, exactly. So, you know, people are opting for that where they know they're going to get paid on time rather than going for a builder where they don't know whether or not to build a solvent and they may not necessarily get paid.

Wow. So this is causing a little bit of an issue on multiple fronts in the construction industry.

Yeah. And then there were a lot of the builders. They do fixed price contracts for in the future. So they, you know, we'll sign a contract today knowing your property is not titling for two years, but the price today is the price of the contract. So those that were signed, you know, before COVID and early on in Covid where the titles got pushed back and then all of the supplies went up in price and all of the labor prices went up and all of a.

Sudden the contracts are underwater.

Exactly right. And they're having to build them for that price. So. And they can't. So they're going belly up.

And what's happening to a lot of these families that are, you know, facing this issue and can't get their houses built. What do they do from there?

Well, it's actually quite a problem because they're having to pay rent or the mortgage on the place that they're currently living and then they've got the mortgage on the place that they are supposed to be living in. So they're paying two mortgages but only have one property to live in, which isn't the one they wanted.

Nope.

And they're having to go through builders insurance. But that takes time. I mean, that's, that's not going to be fixed in, you know, a couple of months. That take some serious time. So in the meantime, they're stuck paying the two mortgages.

And if they've had to abandon their previous contract and get a new one, the new one's usually 50, 60 to 100 grand more than what it was.

Exactly right.

So many unexplored. It's a really difficult situation. Is the government stepping in at all?

Are they, My understanding is the government supporting them with their insurance claims, but that's really it. Yeah, yeah. So. And also to a lot of the. At the bigger builders where, you know, it was well publicized that they had gone under the houses that were advertising those builders as the builders got things stolen out of them. So they got. Really. Yeah. So not only are they, you know, 95% built and paying two mortgages, but now the house has been destroyed and they're basically having to start again that.

Again, it's just such a terrible situation to be in. It really is. We feel for any family out there that's going through it. It's horrible. Absolutely. So we're talking about. Yeah. So there's obviously low supply of property in Australia. Why is the demand for property increasing? You know, I was on the understanding that we had less immigration coming in, so potentially that that would have softened a bit, but it seems like it's just, you know, never ending demand.

Yeah, I think it's a bit of a combination of a few things. Firstly, that the people who are building houses who now can't build. Yep. They are stuck in the rental properties that they had before. The people who were moving out of home that were going to be living in those places now can't live in those places because previous tenants are still there, so they're looking for other properties. And then we actually have 200,000 immigrants coming over in the next few years that are going to need housing as well.

Yeah.

So demand is. Demand is not shrinking.

So it's good if you have a property right now, not good if you don't. We don't really know what's going to happen, do we, over the next kind of 6, 12, 24 months?

No. There are a lot of indicators that would suggest that property prices should go down, but then there are a lot of indicators that suggest that they should go up. So probably what's going to happen is what's currently happening, which is areas of high demand are going to keep going up and the areas of low demand will start to shrink.

Mm. And what are the. What are the states doing at the moment? Like, is there any particular state that's kind of skyrocketing more than any other, or is it pretty much across the board?

Queensland's going crazy. Well, it is funny, in Queensland.

People.

Are moving up their indros, particularly retirees who don't want to deal with the Melbourne weather. Yeah, WA has gone crazy lately, too, but WA is one of those markets that will go nuts for a year or two and then really retract, so. Yes.

Yeah. Just. I mean, speaking from personal experience, we've got family members who have held onto a house for the last kind of 10 years and only in the last probably 6 to 9 months. Has it gone up almost 200k? I think it is in just such a short period of time and it's just that huge rental demand as everybody's coming back into the state. I remember when we were trying to get a rental property, we had to offer $200 a week over the asking price just to be able to secure the property. I could not believe it at the time, but that's just what the market's doing. It's insane.

Yeah, yeah, absolutely. But then a year from now, the property prices will come back and they'll stay stagnant again for 10 years.

Yeah, exactly. So sell down, basically. You gotta buy. Yeah, exactly.

Right, exactly.

This is a very broad kind of discussion, obviously, but what do you think is the long term solution to a housing crisis like that we're experiencing right now where families, genuinely, families are going homeless. You know, people are having to living conditions that they don't want to live in. Like, where do we go from here?

It's a real tricky one because I think a lot of people, they like to live in the area that they used to living in and so they get upset when they're not able to get property for rental or for purchase in the areas that they want to live in. And sometimes, you know, that just is what it is. Maybe we need to look at moving out somewhere close, but not the same place, you know, somewhere where you can afford rather than somewhere where you want to live.

Some of those suburbs where you may not think you want to live there, there's so many more people moving there, there's so much more activity, there's new shopping centers, there's new lifestyle areas. It's just there's so much more going into those suburbs that within the next kind of couple of years they're going to be the place that you want to live anyway. And you would have gotten in on the ground kind of level.

Absolutely. And in a lot of those places the land is really cheap, which is great and. But you've got to build, which is a problem. And people are really shying away from building right now, which is understandable because they don't know that there's a real risk there that they might not get a house. Yeah, you know, there are some builders that are advertising that they're really well backed and so, you know, the chances of them being able to finish your house are pretty high. But then there are a lot of others that don't have that same backing, so.

And the contract price is usually a little bit More inflated in that case anyway.

Right.

Like they're having to. Exactly at the moment to try. Try and get. Get us through.

Yeah. And then if you look at areas like, for example, Windham Valley, Victoria, where you might buy a block of land for $300,000 and then you might be able to build, which a build, you know, a year ago would have been 350 and you're now looking at 450, 500,000 for the same build. That property complete is probably worth 550. Right. So even if you do decide to buy the land and you do decide to build for that price, the valuations aren't coming when they come in because you can't get the money back.

That's easy.

Yeah.

So you think Queensland's pretty good right now everywhere looking. Some pockets are looking pretty good right now all across Australia. Don't try and build.

Yeah, don't try and build. Buy established. Yeah. But it's really, it's more suburb specific than it used to be. So you find, you know, for example, in Melbourne, you know, the west would be doing something, east would be doing something else. Now it's specific that are going really well.

Yeah, yeah. Also pick your pocket. Pick your pocket.

Exactly.

Well, that's really interesting. Thank you so much, Charles. It's always fascinating to get a bit of an update from you, so I really appreciate that. Basically everything's a bit crazy. We really don't know what's going to happen. And just keep an eye on your.

Local area in a nutshell.

Awesome. Thank you so much, Chels. Looking forward to having you on again very soon.

Thanks so much, Jeff.