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The no 1 formula for locating property investment success · The Money Puzzle

• 0:07
  Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
• 0:11
  Speaker 1: James Kirkby. Welcome aboard, everybody, Welcome aboard to our final
• 0:15
  Speaker 1: property episode of the year, your final Tuesday Property Intelligence bulletin.
• 0:22
  Speaker 1: I'm looking at the numbers for the year and hey,
• 0:26
  Speaker 1: you know, it's fine. I think most people would be
• 0:28
  Speaker 1: pretty happy. Seven point eight percent is what we're looking
• 0:31
  Speaker 1: at as a nation wide house price increase. But as
• 0:34
  Speaker 1: anyone will tell you, what property is local and my
• 0:36
  Speaker 1: guest today will definitely be interested in elaborating on that theme.
• 0:42
  Speaker 1: It's Terry Rider of the Hotspoting Group, a regular on
• 0:46
  Speaker 1: the show.
• 0:46
  Speaker 2: How are you, Terry?
• 0:48
  Speaker 3: I do well, James, and everything I've said so far
• 0:51
  Speaker 3: certainly aligned with everything that we're seeing at the moment.
• 0:55
  Speaker 3: Very strong into the year. But I think particular the
• 0:57
  Speaker 3: momentum we're taking into twenty twenty six is very very
• 1:01
  Speaker 3: powerful for markets right across the country.
• 1:04
  Speaker 1: Yeah, there has been quite a lift. The only thing
• 1:06
  Speaker 1: I suppose hanging over it all is about rates. I
• 1:09
  Speaker 1: see Caitlin Ezzi, the economist that cautality which we all
• 1:13
  Speaker 1: knew once upon a time as core logic. She says
• 1:16
  Speaker 1: that there has been a slow down in these last
• 1:20
  Speaker 1: few weeks, and that she says there is a some
• 1:24
  Speaker 1: clear evidence of slow down in growth consistent with certain
• 1:28
  Speaker 1: conditions happening at the moment, the big issue being, of course,
• 1:32
  Speaker 1: people thought there would be a rate cut. There isn't
• 1:34
  Speaker 1: going to be a rate cut. There is a distinct
• 1:37
  Speaker 1: possibility the money market suggests we'll have rate rises. We
• 1:41
  Speaker 1: could have two rate rises. The other part for investors
• 1:44
  Speaker 1: vacancy rates. There's a little bit of a lift in them,
• 1:48
  Speaker 1: and they are showing what Louis Christopher calls tentative signs
• 1:52
  Speaker 1: of easing, so slow down in the momentum of price
• 1:55
  Speaker 1: increases in the last month or two, a bit of
• 1:58
  Speaker 1: an easing in vacancy rates.
• 2:00
  Speaker 2: Is there a chance that the sort of growth we saw.
• 2:05
  Speaker 1: In twenty twenty five, with pretty chunky seven point percent nationwide,
• 2:08
  Speaker 1: do you think we could have a bit of a
• 2:10
  Speaker 1: still down for us in the early part of the year.
• 2:13
  Speaker 3: I think there's not the remotest possibility of that happening, James.
• 2:16
  Speaker 3: I think there's a tendency to place too much emphasis
• 2:20
  Speaker 3: on short term data like the latest month SOSIA show
• 2:25
  Speaker 3: slow down, and maybe the last two months and that's significant.
• 2:29
  Speaker 3: I think some analysts always overrate short term data way
• 2:34
  Speaker 3: too much and we're looking for longer term trends. In fact,
• 2:38
  Speaker 3: we're seeing the opposite. And one of the things that
• 2:40
  Speaker 3: we do that I don't think anyone else does is
• 2:43
  Speaker 3: that we monitor sales activity figures because we think that's
• 2:46
  Speaker 3: a really forward, really strong forward indicator what will happen
• 2:49
  Speaker 3: in prices. And right now the sales activity figures the volumes,
• 2:54
  Speaker 3: which means by demand is the strongest I think I've
• 2:58
  Speaker 3: ever seen in so many play what we normally see
• 3:02
  Speaker 3: that This is what I do every quarter for our
• 3:05
  Speaker 3: report we published called the Price Predictor Index, and it's
• 3:07
  Speaker 3: based on analysis of sales activity patterns in every suburban
• 3:12
  Speaker 3: town in the country and it's a great forward indicator
• 3:16
  Speaker 3: what will happen with prices, particularly in the short term.
• 3:19
  Speaker 3: And normally what we have is like lots of variations
• 3:24
  Speaker 3: across the country of markets that are rising strongly, some
• 3:26
  Speaker 3: of that are consistent, some of that are falling. I
• 3:29
  Speaker 3: often think we have a full speed market in Australia,
• 3:32
  Speaker 3: boom markets, moderate growth stagnation and the places that are falling.
• 3:36
  Speaker 3: But right now everywhere has got strong by demand, and
• 3:40
  Speaker 3: we could talk about the reasons why I think that's
• 3:42
  Speaker 3: the case. But we're going into twenty twenty six with
• 3:46
  Speaker 3: really strong momentum in terms of by demand at a
• 3:49
  Speaker 3: time of still shortages of everything that matters, and I
• 3:53
  Speaker 3: think it's a formula for prices to rise next year.
• 3:56
  Speaker 3: And I think what they choose to do or not
• 3:59
  Speaker 3: do with interest rate is not going to be particularly relevant.
• 4:03
  Speaker 2: Is that right? You're thinking of investors. It would matter
• 4:07
  Speaker 2: to horn byers, wouldn't it.
• 4:10
  Speaker 3: I mean, I just think that economists and particular completely
• 4:13
  Speaker 3: overrate the impact of interest rate movements when they're analyzing
• 4:18
  Speaker 3: residential property markets. And that's what causes big bank economists
• 4:22
  Speaker 3: to continually get their forecast wrong. What's going to happen
• 4:26
  Speaker 3: with the property prices at the start of every year,
• 4:27
  Speaker 3: they make their forecast. The start of twenty twenty three,
• 4:31
  Speaker 3: interest rates for rising, so they said prices were going
• 4:33
  Speaker 3: to fall everywhere, and they didn't. Process rose. The start
• 4:36
  Speaker 3: of twenty twenty four. They said interest rates were stubbornly high,
• 4:39
  Speaker 3: So prices we're going to fall everywhere, and they didn't.
• 4:42
  Speaker 3: We had prices rising. And they keep making the same
• 4:45
  Speaker 3: mistake that they think that interest rates are the paramount
• 4:47
  Speaker 3: influence on property markets and we think they're not. They
• 4:50
  Speaker 3: may keep interest rates on hold at some point, they
• 4:53
  Speaker 3: may make a cuttle two next year, or they may
• 4:56
  Speaker 3: even have an increase, which some people are speculating will happen.
• 5:00
  Speaker 3: I don't think it matters that much. If we had,
• 5:03
  Speaker 3: say three increases, it would matter, But if we had one,
• 5:06
  Speaker 3: I just think it's kind of irrelevant because there are
• 5:10
  Speaker 3: right now, as there always is, far more powerful forces
• 5:13
  Speaker 3: in the market driving by demand at a time of shortage.
• 5:17
  Speaker 3: That's those are the big factors, and we can talk
• 5:20
  Speaker 3: about what they are.
• 5:20
  Speaker 1: And that demand if you can't just kind of snuffsys
• 5:23
  Speaker 1: for us, what the key elements of that demand is
• 5:26
  Speaker 1: that makes you so confident?
• 5:29
  Speaker 3: Yeah, Well, firstly, we're seeing strength and by demand rising
• 5:32
  Speaker 3: demand in most market jurisdictions. And this analysis we divide
• 5:36
  Speaker 3: Australia into fourteen major jurisdictions, eight capital cities and six
• 5:39
  Speaker 3: state regional markets. And normally in this report we have winners,
• 5:43
  Speaker 3: we have losers, and we have the steady ones in between.
• 5:46
  Speaker 3: And this latest analysis, which we haven't published yet but
• 5:49
  Speaker 3: we will next week, there are no losers and there
• 5:52
  Speaker 3: are only a couple of steady ones everywhere else is
• 5:55
  Speaker 3: what we would classify as a winner because they have
• 5:57
  Speaker 3: such strong momentum in terms of by demand, and we've
• 6:01
  Speaker 3: seen markets which have been a little bit dormant recently,
• 6:05
  Speaker 3: like Melbourne, like Hobart, like regional Tasmania, like regional New
• 6:10
  Speaker 3: South Wales really coming to the four pointing to a
• 6:14
  Speaker 3: very strong performance in twenty twenty six.
• 6:17
  Speaker 1: Right, Okay, we're going to look Obviously we look at
• 6:20
  Speaker 1: this tell us about the year that's just passed. So
• 6:22
  Speaker 1: it seems to me Brisbane and Perth were a knockout
• 6:25
  Speaker 1: in terms of performance, with Sydney and Melbourne actually dragging.
• 6:29
  Speaker 2: Is that how it went?
• 6:31
  Speaker 3: Yeah, And when the figures differ from one source to
• 6:35
  Speaker 3: the next, it's amazing how much they have different numbers
• 6:37
  Speaker 3: whether you look at domain or cotality or prop track,
• 6:41
  Speaker 3: but the general patterns are pretty much the same and
• 6:44
  Speaker 3: actual fact, most of them would have Darwin as number
• 6:47
  Speaker 3: one for house price growth and that's certainly something that
• 6:51
  Speaker 3: we expected because we saw it in that the sales
• 6:54
  Speaker 3: activity patently huge uplifting by demand in Darwin sort of
• 6:58
  Speaker 3: from the start of this year, and it's carried throughout
• 7:01
  Speaker 3: the year to the point where it's now leading on
• 7:03
  Speaker 3: price growth. Brisbane's still very strong. Perth, depending on whose
• 7:07
  Speaker 3: figures you believe, still hanging there quite stubbornly, but you
• 7:11
  Speaker 3: know it was the runaway leader in the past, say
• 7:14
  Speaker 3: two to three years, but certainly not this year. It's
• 7:17
  Speaker 3: sort of starting to come back to the pack, and
• 7:20
  Speaker 3: again depending on whose figures you look at, it's sort
• 7:22
  Speaker 3: of no longer leading. Some of the regional markets doing
• 7:26
  Speaker 3: very well, particularly if you break it down into individual cities.
• 7:30
  Speaker 3: Regional Queensland locations like townsviall have been absolutely extraordinary in
• 7:34
  Speaker 3: the last couple of years. Clean the last twelve months,
• 7:37
  Speaker 3: I'd say Darwin's the capital growth star for the past
• 7:42
  Speaker 3: year across Australia, where just about every suburb's done better
• 7:45
  Speaker 3: than twenty percent, which also doesn't surprise us because we
• 7:49
  Speaker 3: could see the momentum in that market. So yeah, those
• 7:52
  Speaker 3: are the places that have done really well. Sydney and
• 7:54
  Speaker 3: Melbourne have lagged, but I think that will be different
• 7:57
  Speaker 3: in twenty twenty six. Melbourne. It takes a while for
• 8:00
  Speaker 3: the momentum in the market actually translates into the priced
• 8:03
  Speaker 3: data that's published by the usual suspects, and we are
• 8:07
  Speaker 3: seeing and hearing anecdotically that in Melbourne we're seeing extraordinary
• 8:11
  Speaker 3: results happening at auctions and all over greater Melbourne, including
• 8:16
  Speaker 3: in some of the more affordable areas. You might expect
• 8:19
  Speaker 3: the big auction results to be happening in the upmarket areas,
• 8:22
  Speaker 3: but some of the locations like Frankston in the far
• 8:24
  Speaker 3: Southwest and Point Cook in the far Southeast having the
• 8:28
  Speaker 3: most extraordinary upcomes at auctions. But that hasn't really flowed
• 8:32
  Speaker 3: through into the price data yet for Melbourne, but I
• 8:36
  Speaker 3: think we'll see that in twenty twenty six because there's
• 8:38
  Speaker 3: certainly been a massive uplift in by demand in Melbourne
• 8:42
  Speaker 3: markets in the second half.
• 8:44
  Speaker 1: Is that universal first home deposit? Is that relevant to that?
• 8:47
  Speaker 3: Do you think it's certainly playing a part. The reasons
• 8:51
  Speaker 3: why we do have such strong by demand in Melbourne,
• 8:54
  Speaker 3: but also elsewhere include the federal government schemes which are
• 8:59
  Speaker 3: bringing additional demand into that lower end of the market.
• 9:03
  Speaker 3: And what we're seeing across Australia is that it's the
• 9:06
  Speaker 3: affordability rules and it's the affordable parts of markets that
• 9:09
  Speaker 3: are really leading the charge. And that's true in Sydney.
• 9:12
  Speaker 3: It's true in Melbourne, it's true right across the country,
• 9:15
  Speaker 3: and that's certainly been exacerbated by the federal government schemes.
• 9:20
  Speaker 3: We also have a force high population growth fueled by
• 9:23
  Speaker 3: large numbers of overseas migrants coming into Australia in recent years.
• 9:28
  Speaker 3: It's been escapegoaded by some as the cause of the
• 9:30
  Speaker 3: housing crisis. It's not, but it's certainly part of the equation.
• 9:33
  Speaker 3: But the fact that James that's never talked about in media,
• 9:38
  Speaker 3: but we think it's really important. We rate this very highly,
• 9:40
  Speaker 3: is that we have right now in Australia an absolutely
• 9:43
  Speaker 3: unprecedented level of investment in major infrastructure. If you look
• 9:47
  Speaker 3: at all the projects across the country they are currently
• 9:50
  Speaker 3: happening or planning, it's nine hundred billion dollars worth and
• 9:53
  Speaker 3: we've never seen anything that big in Australia. We believe
• 9:56
  Speaker 3: at hot Spotting that infrastructure investment is a huge generation.
• 10:00
  Speaker 3: First Ly, vegan I make activity and therefore jobs and
• 10:03
  Speaker 3: that translates into high demand for real estate. And this
• 10:06
  Speaker 3: has happening right across the country. It's quite massive. Like
• 10:09
  Speaker 3: as I said, unprecedented.
• 10:11
  Speaker 1: Is there a particular project that kind of captures it.
• 10:14
  Speaker 3: Look some of the projects that sort of epitomize it are.
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  Speaker 3: The biggest national infrastructure project right now is the inlande
• 10:22
  Speaker 3: rail Link, which is a thirty three billion dollar project
• 10:25
  Speaker 3: well under construction and where it's being built along through
• 10:28
  Speaker 3: regional New South Wales and parts of Queensland and parts
• 10:32
  Speaker 3: of because it's linking Melbourne to Brisbane. We've seen in
• 10:35
  Speaker 3: uplift and property markets with that construction, the Western Sydney
• 10:39
  Speaker 3: Airport and the aertropolis surrounding. That's like feeding steroids for
• 10:43
  Speaker 3: a property market. So when that's completed, that's going to
• 10:46
  Speaker 3: have a massive impact. But probably the thing that we
• 10:50
  Speaker 3: rate the highest is a type of infrastructure has a
• 10:53
  Speaker 3: huge impact and its huge right now, and that is hospitals.
• 10:57
  Speaker 3: When you build like a billion dollar hospital, there's like
• 11:01
  Speaker 3: three or four thousand jobs in building it, and that
• 11:03
  Speaker 3: brings demand into the location where it's happening. But when
• 11:05
  Speaker 3: it's finished, there's five or six thousand jobs in running it,
• 11:08
  Speaker 3: and these people typically want to live close to where
• 11:11
  Speaker 3: they're working and going every day, and that just brings
• 11:15
  Speaker 3: massive impetus to the region in which it sits. And
• 11:19
  Speaker 3: right now in Australia, there are one hundred and forty
• 11:21
  Speaker 3: four hospital projects of at least two hundred million dollars
• 11:25
  Speaker 3: and that total is investment of one hundred and fifteen
• 11:28
  Speaker 3: billion dollars. So these projects are happening all across the
• 11:32
  Speaker 3: country in regional centers like to Woomba and Bunderberg and Queensland.
• 11:35
  Speaker 3: There's a number of them happening in Sydney, there's a
• 11:37
  Speaker 3: number of them happening in Melbourne, like Frankston for example.
• 11:41
  Speaker 3: One of the reasons why that market's really hot. And so, yeah,
• 11:45
  Speaker 3: one hundred whether it's one hundred and forty four major
• 11:48
  Speaker 3: hospital projects right now extraordinary.
• 11:52
  Speaker 1: Does it attract investors as well because they know the
• 11:55
  Speaker 1: excellent rental conditions I imagine in those catchments.
• 12:00
  Speaker 3: Well, that's right, And as we often say to people,
• 12:02
  Speaker 3: you know, if you've got one of these big hospital
• 12:04
  Speaker 3: projects and in the midst of a market on which
• 12:08
  Speaker 3: you own property, you can be assured there's going to
• 12:11
  Speaker 3: be strong rental demand. And one of the things that
• 12:14
  Speaker 3: tends to happen is universities and hospitals tend to cluster
• 12:18
  Speaker 3: together in our major cities and so typically you'll have
• 12:22
  Speaker 3: a region of a city where there's a major university
• 12:25
  Speaker 3: campus and a big hospital's precinct. Like in Melbourne around
• 12:29
  Speaker 3: sort of Carlton Park World there's two university campuses and
• 12:32
  Speaker 3: a big hospitals precinct, huge rental demand around that. So
• 12:36
  Speaker 3: one of these.
• 12:37
  Speaker 4: If you're an unverstor looking for a simple but workable
• 12:41
  Speaker 4: formula to buy in areas that are going to outperform,
• 12:45
  Speaker 4: look at where they're building these big hospital projects and
• 12:47
  Speaker 4: act accordingly.
• 12:48
  Speaker 3: Examples include to Woomboro, a very strong diverse regional economy.
• 12:54
  Speaker 3: In Queensland, we've got a lot happening. It's part of
• 12:57
  Speaker 3: the inland railing. It's the Queensland hup for that, but
• 12:59
  Speaker 3: it's got one point two billion dollar hospital to be
• 13:01
  Speaker 3: built there. Bunderberg and Queensland also has one of these.
• 13:05
  Speaker 3: These are strong regional centers anyway, and they offer affordability
• 13:09
  Speaker 3: to investors and above average rental years. These hospital projects
• 13:14
  Speaker 3: are game changes. They take these markets to another level
• 13:16
  Speaker 3: because it means that thousands of jobs and building them,
• 13:19
  Speaker 3: but when they're finished, there'll be five thousand jobs at
• 13:22
  Speaker 3: least in running them. And you can imagine what goes
• 13:24
  Speaker 3: to a regional city.
• 13:25
  Speaker 1: And I suppose compared to students. It's twelve months of
• 13:28
  Speaker 1: the year, it's not it doesn't have the seasonality after
• 13:32
  Speaker 1: student accommodation from an investment for you.
• 13:34
  Speaker 3: Yeah, So generally speaking, I think this is a factor
• 13:38
  Speaker 3: that it's not talked about in terms of why do
• 13:40
  Speaker 3: we have prices rising everywhere and as quite unusual? James
• 13:44
  Speaker 3: to the latest figures from Totality and prop Track, et cetera,
• 13:47
  Speaker 3: show that every city and every regional market has prices
• 13:51
  Speaker 3: up in the latest month and also in annual terms.
• 13:55
  Speaker 3: That's really unusual. We normally have boom markets and moderate
• 13:58
  Speaker 3: markets and some markets with prices have fallen, but right there,
• 14:01
  Speaker 3: prices are up everywhere. One of the reasons I believe
• 14:05
  Speaker 3: that's the case but not being discussed is this massive
• 14:07
  Speaker 3: infrastructure investment and all the jobs it's generating and all
• 14:10
  Speaker 3: the economic activity it's generating in different parts of the
• 14:13
  Speaker 3: country and therefore demand for real estate it is.
• 14:17
  Speaker 1: Well, you have the facts to your fingertips, so it
• 14:19
  Speaker 1: is a compelling argument. Folks, will take a break, we'll
• 14:22
  Speaker 1: be back in a moment. Hello, welcome back to The
• 14:31
  Speaker 1: Australian's Money Puzzle. I'm talking to Terry Ryder of the
• 14:33
  Speaker 1: Hot Spotting Group, Terry. That was really interesting in the
• 14:36
  Speaker 1: first part. And though I was familiar in isolated examples
• 14:40
  Speaker 1: of exactly what you're talking about where there had been infrastructure,
• 14:45
  Speaker 1: specifically health infrastructure, hospital infrastructure, and where it had lifted
• 14:50
  Speaker 1: the segment around that, I hadn't known that it was
• 14:52
  Speaker 1: literally being repeated across the metropolitan centers at an extraordinary rate,
• 14:57
  Speaker 1: at the rate you've never seen, and you've been in
• 14:59
  Speaker 1: this game a long time. Tell us just looking back
• 15:01
  Speaker 1: on the year then and looking forward, if we put
• 15:05
  Speaker 1: it out at the start of the show that it
• 15:08
  Speaker 1: was everywhere but the big cities where we had some
• 15:10
  Speaker 1: serious growth.
• 15:11
  Speaker 2: So basically last.
• 15:12
  Speaker 1: Year being the year twenty twenty five, last the year two.
• 15:15
  Speaker 1: Now the big cities city in Melbourne did about four
• 15:18
  Speaker 1: or five percent each, but the national figure was closer
• 15:22
  Speaker 1: to eight, right, it was seven point eight percent, and
• 15:25
  Speaker 1: then there's these Perth and Brisbane were in the teens, right,
• 15:29
  Speaker 1: thirteen percent or so. What's your thoughts about whether that
• 15:34
  Speaker 1: pattern will extend into twenty twenty six.
• 15:39
  Speaker 3: I think we're going to see change. Ifact often say
• 15:41
  Speaker 3: that the only constant in real estate is change, And
• 15:44
  Speaker 3: if I'm doing a seminar presentation. One of the things
• 15:47
  Speaker 3: I quite often do is put three slides side by
• 15:50
  Speaker 3: side where the price growth figures were sitting twelve months ago,
• 15:53
  Speaker 3: where they were six months ago, and where they are now.
• 15:56
  Speaker 3: Quite significant differences, and I think we're going to see
• 15:59
  Speaker 3: even or change to the pecking order in terms of
• 16:02
  Speaker 3: price growth in twenty twenty six. Certainly, I think Melbourne's
• 16:06
  Speaker 3: going to be much higher, Perth will be lower. Adelaide
• 16:09
  Speaker 3: is also coming down the packet's been one of the
• 16:11
  Speaker 3: national leaders, has had fantastic growth for five years, but
• 16:15
  Speaker 3: we're now starting to see the numbers get smaller and
• 16:17
  Speaker 3: smaller in terms of Adelaide inevitably, because that kind of
• 16:21
  Speaker 3: growth cannot go on forever. Five years is extraordinary in fact.
• 16:26
  Speaker 3: But I think we're going to see Hobart rising up
• 16:29
  Speaker 3: the picking order. We've seen a big uplift and buy
• 16:31
  Speaker 3: demand there, and in the latter part of this year
• 16:34
  Speaker 3: Melbourne we're seeing extraordinary uplift and by demand. So we
• 16:37
  Speaker 3: think that'll be showing up in the price data as
• 16:40
  Speaker 3: we get into twenty twenty six, and so by this
• 16:43
  Speaker 3: time next year, if we're having this conversation James, I'll
• 16:45
  Speaker 3: expect us to be talking about Melbourne as one of
• 16:47
  Speaker 3: the price gross leaders. I mean, it's offering such good
• 16:50
  Speaker 3: value for money right now. That's why people are looking
• 16:53
  Speaker 3: at People have been reticent to invest in Melbourne and
• 16:56
  Speaker 3: Victoria because the taxes are so much higher and the
• 16:59
  Speaker 3: state government legislation government relationship between landlords and tenants is
• 17:03
  Speaker 3: particularly onerous to landlords. But people are looking at the
• 17:07
  Speaker 3: value for money and noticing that Melbourne is not only
• 17:10
  Speaker 3: much cheaper than Sydney, but it's cheaper now than Brisbane,
• 17:13
  Speaker 3: and it's about on a par with Adelaide and Perth
• 17:15
  Speaker 3: in terms of meeting prices. And people say, well, Melbourne's
• 17:19
  Speaker 3: clearly undervalued. It's overdue for a spurt of growth. The
• 17:22
  Speaker 3: population growth is really strong. There's this huge infrastructure investment happening.
• 17:28
  Speaker 3: Melbourne's time has come, and I think by this time
• 17:31
  Speaker 3: next year that will be shown up quite strongly in
• 17:34
  Speaker 3: the price growth figures. So Melbourne will be a leader.
• 17:36
  Speaker 3: Hobart will be there. We've also seen some considerable life
• 17:40
  Speaker 3: very recently in the Canberra market. Of course, we never
• 17:44
  Speaker 3: seem to talk about Canberra, and no one ever asked
• 17:46
  Speaker 3: me about Canberra, but we've seen massive uplift recently in
• 17:50
  Speaker 3: the unit market in Canberra, and this is a national
• 17:54
  Speaker 3: trend which I know we've talked about in the past,
• 17:56
  Speaker 3: but it's becoming strong and stronger. More and more buying
• 17:58
  Speaker 3: cohorts are opting for attached dwellings, not just for affordability,
• 18:02
  Speaker 3: but all sorts of motivations, and we're seeing much better
• 18:05
  Speaker 3: capital growth performance by units. And of course traditionally houses
• 18:09
  Speaker 3: on land have always outperformed units on capital growth, but
• 18:12
  Speaker 3: that has changed in a majority of local government areas
• 18:16
  Speaker 3: across Australia in the last twelve months, units have actually
• 18:19
  Speaker 3: outperformed houses on price growth and that's becoming a bit
• 18:24
  Speaker 3: of a paradigm shift and a real game changer for
• 18:27
  Speaker 3: people who are looking for affordability. It's becoming harder and
• 18:30
  Speaker 3: harder to find, particularly in the big cities, knowing that
• 18:33
  Speaker 3: units are now starting to perform very strongly on capital
• 18:37
  Speaker 3: growth and also have better rental yields and houses typically,
• 18:41
  Speaker 3: although you do also have higher costs in terms of
• 18:45
  Speaker 3: body corporate charges. But that's a bit of a game
• 18:48
  Speaker 3: changer for people to keep in mind. But Canberra particularly
• 18:51
  Speaker 3: shows out in that regud big uplifted in buyer demand
• 18:55
  Speaker 3: for units and affordability is probably part of the reason
• 18:58
  Speaker 3: for that because the medium price for houses and cameras
• 19:01
  Speaker 3: around a million dollars, but for units there's about six
• 19:04
  Speaker 3: hundred thousand, so quite a differential there.
• 19:06
  Speaker 1: Okay, So just one last thing, Terry on this this
• 19:10
  Speaker 1: looking forward. You mentioned this by buyer demand all the
• 19:14
  Speaker 1: time and it's what convinces you. But what's your indicator
• 19:17
  Speaker 1: of buyer demand? Is there something in particularly you look
• 19:19
  Speaker 1: at it? Is there a couple of indicators, yes, well.
• 19:21
  Speaker 3: Or sales volumes. We look at them quarter by quarter
• 19:24
  Speaker 3: and we look at the pattern. So and in the
• 19:27
  Speaker 3: report I mentioned that we include this information in We
• 19:30
  Speaker 3: have like a like our top fifty supercharged suburbs around
• 19:34
  Speaker 3: the country and these are ones with the strongest pattern
• 19:36
  Speaker 3: of rising sales volumes over four or five six quarters
• 19:41
  Speaker 3: in a row. And I have to later today whittle
• 19:45
  Speaker 3: my very large short list down to just fifty because
• 19:48
  Speaker 3: there's so many candidates at the moment. Unit markets. Unit
• 19:52
  Speaker 3: Market's very prominent in that was house markets showing up
• 19:55
  Speaker 3: in Brisbane, in Hobart, in camera with unit markets and
• 20:00
  Speaker 3: parts of Sydney and parts of Melbourne, and what stands
• 20:04
  Speaker 3: out is that it's the affordable parts of those markets.
• 20:07
  Speaker 3: We know that Sydney is a very expensive market, but
• 20:10
  Speaker 3: the ones that really stand out, the precincts that stand
• 20:13
  Speaker 3: out in Sydney are the ones that are dominated by
• 20:16
  Speaker 3: unit sales and that Paramatta, for example, the Paramatta Local
• 20:19
  Speaker 3: Company are very strong. The inner west of Sydney, the
• 20:22
  Speaker 3: city of Ride is very strong, but those are all
• 20:24
  Speaker 3: markets where units dominate. In Melbourne, we're seeing the outer
• 20:29
  Speaker 3: ring suburbs for houses are the strongest markets, but also
• 20:32
  Speaker 3: the inner city areas for units because those inner city
• 20:36
  Speaker 3: areas like Carlton and Parkville and Kensington have very affordable
• 20:41
  Speaker 3: units on offer, very close to the hospitals, the universities
• 20:44
  Speaker 3: and the cbdotes.
• 20:45
  Speaker 1: So would back into that theme that the hardest part
• 20:48
  Speaker 1: of the market is the entry level, the affordable end
• 20:52
  Speaker 1: out suburbs.
• 20:53
  Speaker 3: Been and that's been pumped up by the federal schemes
• 20:57
  Speaker 3: which are bringing more first home buyers into the market,
• 21:00
  Speaker 3: and of course there's plenty of commentary that they're actually
• 21:03
  Speaker 3: making affordability worse. Taking the short term political view that
• 21:08
  Speaker 3: there's more votes and throwing money at people than actually
• 21:11
  Speaker 3: fixing the affordability problem. So ultimately they're making it harder
• 21:15
  Speaker 3: for more people to get into the market because affordability
• 21:18
  Speaker 3: is of course one of the fundamental issues, and that's
• 21:21
  Speaker 3: becoming more and more so.
• 21:23
  Speaker 1: Yes, so that's the issue. Isn't that that we're all paying.
• 21:26
  Speaker 1: What's going on is we're paying more for the same
• 21:28
  Speaker 1: houses for rather than an expansion of the number of
• 21:30
  Speaker 1: houses that are there to buy. Okay, we'll be back
• 21:33
  Speaker 1: in a moment, folks. Hello, welcome back to the Australian's
• 21:43
  Speaker 1: Money Puzzle. I'm talking to Terry Ryder of the hot
• 21:45
  Speaker 1: Spotting group James Kirby here on the final show of
• 21:48
  Speaker 1: the year. Terry, I've just two questions. Two final questions
• 21:51
  Speaker 1: are for the year from our Property Investment Brigade. Martin asks,
• 21:56
  Speaker 1: can you explain about mortgage buffers? Do they still stand
• 22:00
  Speaker 1: now that the banks have been asked to curtail they're
• 22:03
  Speaker 1: lending to high risk borrowers. Really good question, market, So
• 22:06
  Speaker 1: everybody you would know that the banks have been told
• 22:08
  Speaker 1: to cool it on lending to borrowers who are taking
• 22:13
  Speaker 1: more than six times their income. They can't have more
• 22:15
  Speaker 1: than twenty percent of their book out on that, so
• 22:19
  Speaker 1: that is a targeted attempt to cool the market. But
• 22:24
  Speaker 1: as far as I know, the mortgage buffers are also there.
• 22:26
  Speaker 1: They haven't been that they still stand. Don't They tell
• 22:28
  Speaker 1: you have to you've to add three percent. Basically, if
• 22:32
  Speaker 1: you borrow a mortgage at five percent, you have to
• 22:34
  Speaker 1: or six percent you must add three. As far as
• 22:37
  Speaker 1: testing whether you can repay, the bank adds three percent.
• 22:40
  Speaker 1: That's what the buffer is. So you're not it sounds
• 22:43
  Speaker 1: at start of the show you your projections for the
• 22:47
  Speaker 1: yearhead are so solid that it sounds to me like
• 22:50
  Speaker 1: interest rates or even you know, attempts by regulators to
• 22:54
  Speaker 1: cool the market are not going to cool the market
• 22:57
  Speaker 1: as far as you're concerned.
• 22:58
  Speaker 3: I think what talking about is sensible, but quite moderate.
• 23:04
  Speaker 3: It's not particularly draconian. It's just seeking not so much
• 23:09
  Speaker 3: to call the market, but to curtail the more dangerous
• 23:12
  Speaker 3: end of the lending market, to make sure that they're
• 23:14
  Speaker 3: not lending money to people are over leveraged. So I've
• 23:19
  Speaker 3: had quite a number of conversations with people in the industry,
• 23:22
  Speaker 3: and it's generally felt that it's not going to have
• 23:24
  Speaker 3: a dramatic impact yet unless they go a few steps further.
• 23:28
  Speaker 3: They feel they need to, but what they've been out
• 23:30
  Speaker 3: so far isn't particularly strong. I think it's a good thing.
• 23:34
  Speaker 3: It's a sensible thing, and APRO has taken action in
• 23:37
  Speaker 3: the past, of course, to sort of to prevent property
• 23:41
  Speaker 3: markets getting out of control and lending becoming too risky.
• 23:44
  Speaker 3: And I think it's one of the reasons why realiztate
• 23:47
  Speaker 3: has been so solid in Australia. We don't have collapses
• 23:51
  Speaker 3: and property values except in those sort of high risk
• 23:54
  Speaker 3: mining areas, but generally bricks and mortar is very safe
• 23:58
  Speaker 3: and solid. And one of the reasons, many reasons why
• 24:01
  Speaker 3: I think that's the case in Australia is that we
• 24:03
  Speaker 3: do have organizations like EPRA keeping an eye on things,
• 24:06
  Speaker 3: making sure that things don't get too heated and that
• 24:09
  Speaker 3: the lending doesn't get too risky, and that's been effective
• 24:13
  Speaker 3: in the past.
• 24:14
  Speaker 1: It's certainly I mean, the delinquency rates et cetera at
• 24:17
  Speaker 1: the banks remain almost insignificant. There is uptick of late,
• 24:22
  Speaker 1: but we've seen these little uptics regularly. We have no
• 24:25
  Speaker 1: idea whether this one's different, folks, but there's no evidence
• 24:28
  Speaker 1: so far that is Thank you, Martin, they were that
• 24:32
  Speaker 1: this is never advice, of course information. On the final question, Adam,
• 24:35
  Speaker 1: I love the show. Can we have more shows on
• 24:37
  Speaker 1: industrial property investing for mom and dad investors? Yes, well
• 24:42
  Speaker 1: it's almost a different world. I bet Do you ever
• 24:44
  Speaker 1: go near that area?
• 24:45
  Speaker 2: Terry? Are you strictly residential?
• 24:48
  Speaker 3: Well, we're certainly were right here reports for residential investors,
• 24:52
  Speaker 3: but we're we're doing more and more work with people
• 24:55
  Speaker 3: who specialize in small commercial and infacted. Earlier this year
• 25:01
  Speaker 3: I did three seminars in the three biggest cities with
• 25:04
  Speaker 3: a couple of other practitioners, one of whom was a
• 25:06
  Speaker 3: bias agent and property advisory specializing in commercial for small investors.
• 25:12
  Speaker 3: And what we agreed is that the criteria we use
• 25:15
  Speaker 3: for selecting good locations to invest in residential apply equally
• 25:20
  Speaker 3: to industrial, commercial, retail, small retail storage units almost. And
• 25:26
  Speaker 3: it was really interesting actually being part of the because
• 25:29
  Speaker 3: these were live seminars, not wominars, and so we're in
• 25:31
  Speaker 3: the room with a couple hundred people at each one
• 25:34
  Speaker 3: and a lot of people in the audience. We're talking
• 25:36
  Speaker 3: about what they're doing that there is definitely growing interest
• 25:39
  Speaker 3: amongst property investors. They want a little bit more than
• 25:42
  Speaker 3: passive investment, which is what residential investment tends to be.
• 25:45
  Speaker 3: You buy something, I hope it got crows and value.
• 25:48
  Speaker 3: More and more people are interested in diverting or pivoting
• 25:52
  Speaker 3: into small commercial because it can offer them things that
• 25:56
  Speaker 3: residential maybe can't, such as serious cash flow. Yeah yeah, yeah,
• 26:02
  Speaker 3: longer leases, much better cash flow, serious net yields on
• 26:08
  Speaker 3: which can be positive cash flow. And there's a lot
• 26:11
  Speaker 3: of people out there doing interesting things and all kinds
• 26:14
  Speaker 3: of things storage units, small industrial workshops, small retail, small
• 26:21
  Speaker 3: office buildings. It's generally believed that you don't get the
• 26:25
  Speaker 3: same level of capital growth typically with commercial as you
• 26:29
  Speaker 3: do with residential, but the commercial specialists actually dispute that.
• 26:33
  Speaker 3: They say, if you select the right sort of property
• 26:35
  Speaker 3: in the right locations, you can still have excellent capital
• 26:38
  Speaker 3: growth as well as the cash flow.
• 26:40
  Speaker 1: Of course, the thing is, if you get a vacancy,
• 26:42
  Speaker 1: it's a long vacancy, it's ness to risk. It's not
• 26:45
  Speaker 1: like if you rent a house and someone leaves for
• 26:47
  Speaker 1: someone that's coming pretty quick, but actually so long leases
• 26:50
  Speaker 1: in their long gaps. We haven't time to go through
• 26:52
  Speaker 1: the show, but I certainly had happy enough to do
• 26:55
  Speaker 1: more shows on it. I know we did one or
• 26:57
  Speaker 1: two in the recent past, so thank you Adam. Okay,
• 27:00
  Speaker 1: and thank you Terry Ryder. Lovely to have you on
• 27:02
  Speaker 1: the show. Best of look for the new year, and
• 27:06
  Speaker 1: very interesting what you've told us on the show today
• 27:09
  Speaker 1: about the big picture patterns out there this year, the
• 27:12
  Speaker 1: return of the unit. Very interesting your take that the
• 27:16
  Speaker 1: obviously the infrastructure, particularly hospitals across the nation is underpinning
• 27:20
  Speaker 1: strong investment conditions and also maybe the return of Melbourne
• 27:26
  Speaker 1: to the four in the national and the pecking order
• 27:29
  Speaker 1: as you call it.
• 27:30
  Speaker 2: All right, terrific, Hey, thank you Terry.
• 27:31
  Speaker 3: We'll talk again, okay, Jame's always a pleasure to talk
• 27:34
  Speaker 3: to you. All the best for Christmas and my twenty
• 27:37
  Speaker 3: twenty sixth Bay everything that you wish for.
• 27:40
  Speaker 1: Thank you Terry, and thank you folks. Okay, keep the
• 27:43
  Speaker 1: emails rolling. Love to have some more questions or comments
• 27:46
  Speaker 1: or anything you wish to add to the debate and
• 27:49
  Speaker 1: our chats on the property market the money Puzzle at
• 27:52
  Speaker 1: the Australian dot com dot au.
• 27:54
  Speaker 2: Talk to you soon at the sh