Housing and Rental Shortages Transcript
What I see is a bit of an adjustment in the property market, but I don’t see a collapse in the property market at all. And when I say that, what I’m talking about is residential property in the suburbs.
Now, what I do see a problem with is inner city, property in the city, apartments and commercial spaces in the city, because there’s still a lot of workers who aren’t coming back to work.
So I keep picking on Melbourne. But in Melbourne, a lot of the cafe owners, and that in the buildings where we’ve got interests, and so we talked to the people there. And last time I was in Melbourne, I went and saw a couple of the cafe owners that and they said they’ve seen probably 30% of the workforce that they normally see and 30% of the people coming back through.
So inner city, I’ll see a problem. But if you’ve been listening to me, you shouldn’t be buying property in the city anyway, you should be buying it in the fringes and all that stuff.
The last question I want to ask you, Stephen, on the Australian economy, just from my own interest, is because we had Team members in Global Wealth Club yesterday.
And we were actually having this conversation about cost of living, what’s happening around the housing and rental market, because, for example, I think it was Toowoomba, one of them said that she had a friend applied to go into a rental house and there was like 300 other applicants. And then another one of our team members has a property in Rockingham which was previously leasing for about $250 a week.
Now, she’s been told it can increase around $450. So it just shows you where the world’s heading with inflation and with these property and rental markets and how it’s going to affect the everyday family.
So what are you kind of saying on the housing and rental space and what are you predicting coming in the future?
It’s crazy. Just my own experience with where my mother lived and in that complex units used to be $300 a week, then they went to $450. Now they’re in the mid $500. And that happened in the space of two years. So they basically double in price in the space of two years.
And the other thing that we’ve got that’s really impacting on this, we’ve got a whole heap of things that are happening over a number of years, is why we’re at situationally.
Two is there is a massive shortage of property in Australia, 170,000 homes or something short in Australia. That’s just from natural migration, population growth and all the rest of it.
Another point is that the floods and that we’ve had, especially here on the East coast, there’s a lot of damaged property still, so people are moving to other accommodation while they get their properties fixed.
The other biggest problem that we’ve got is I probably don’t need really need to say this, but governments in the road and government is not releasing land in Queensland to try and get a new subdivision here.
I forget what it was, but it was three years, I think, to try and get a new subdivision done up. A friend of mine in northern New South Wales has been waiting over six years to build a subdivision, right?
Victoria basically, forget it. If you’ve got to cut down a tree to build a house, forget it. You’re going to be waiting up to twelve years to try and get it. And these are the small things. These are the things, once again, government creates the problems that we’re in now.
The other problem is a lot of these councils in flood areas can’t get permits to rebuild the homes because now the councils are worried that they’re going to get sued if they rebuild the houses on a floodplain, that they let people build houses on a floodplain in the first place.
None of the floods that we’ve got now are anything new. Most of these floods aren’t anywhere near as big as the floods that we have in the late 1800s. Floods back then were larger than there is now. It’s just that we’ve had three on back to back.
That’s unusual. But once again in history, it’s happened before. Expect pricing of housing to keep going up, timber, steel, windows, you got shortages of everything going into it.
I’m working with a couple of guys at the moment with our tiny home business to build I think I’ve mentioned it before, is to build tiny villages, tiny home shack villages.
We’ve got two really good councils here in Queensland that have basically said, look, if you guys want to do ten, what we’re going to do is you can do it as of right, all you’re going to do is come to us and get a permit to make sure that your sewage, potable water and electricity meets the minimum standards.
Basically what they’ve said is if you do it as ten, prove that you can do ten, we’ll then help you do 50 if you want to do it. So that’s two councils in Queensland we’ve approached, and that’s great. Victoria we’ve approached a couple of councils, ridiculous.
They want big DAs for everyone and all the rest of it. And one campaigner said, for what you want, even if you took over an existing caravan park with approvals, it would take you three to four years to get the approvals to do what we want. So we’ve given up on Victoria.
New South Wales we haven’t really touched and looked at because of the same thing. We’re just hearing really bad things taking too long. So we’re going to focus on other areas, Tasmania. Some reason Tasmania is really easy.
Queensland is easy in certain areas and the Northern Territory is easy. So the old saying, go where you’re treated best path, the lease resistance and all that stuff.
So there is governments out there that want to leave the housing crisis and housing problem, but most of the pretty much everything we’re dealing with, with inflation, is government induced.
The natural disasters and the floods and the energy, even the energy problem is government induced because they don’t have an energy policy and governments haven’t had decent energy policies for 20 years.
I think the only energy policy that the governments have got at the moment is shut down the reliable energy. That’s noy a good policy.
So that’s my take on living. Expect prices to go up. I’ve heard of just another quick one, here you go. New homes over five years, according to the government goal to build 1 million homes. 2024, 2029, never going to happen. That’s 6, 24 to 23, Nine, that’s seven years, that’s not going to happen.
And they’re trying to get state governments to release more land. Well, what we’ve been saying for ten years.
Will Property Slow Down Due to Rising Interest Rates?
That’s just hot off the press, so interesting.
Yeah. There you go. How’s that for time? We do have a few questions from Frank here in the chat around this topic. I’ll start going one by one. So, firstly, do you see a property slowdown coming due to interest rates? Due to rising interest rates?
No. So what I see is a bit of an adjustment in the property market, but I don’t see a collapse in the property market at all. And when I say that, what I’m talking about is residential property in the suburbs.
Now, what I do see a problem with is inner city, property in the city, apartments and commercial space in the city, because there’s still a lot of workers who aren’t coming back to work.
So I keep picking on Melbourne, but in Melbourne, a lot of the cafe owners, and that in the buildings where we’ve got interests. So we talked to the people there and last time was in
Melbourne, I went and saw a couple of the cafe owners that and they said they’ve seen probably 30% of the workforce that they normally see and 30% of the people coming back through.
So inner city I’ll see a problem, but if you’ve been listening to me, you shouldn’t be buying property in the city anyway, you should be buying it in the fringes and all that stuff.
Now, the adjustment will be around, the rental increase will cover any rising interest rates. And the other thing is, most people, there’s still a lot of people around that have a lot of surplus cash from the pandemic payments.
So there was a story the other day where a woman and her family kept losing out on places and they’re basically living in a tent in their friend’s backyard. And it’s not because they can’t pay the rent, it’s just that they can’t get the forms in time.
Like people are filling out the rental forms and paying deposits way and above and the landlords are just taking it. So it’s not that people can’t afford a lot of these properties, it’s just that they can’t get them so few of them and that’s what I see.
Now, I also see interest rates levelling out at what I call a normal level. I think interest rates under 3.5%, 4% are abnormal and because general inflation of just purely from money printing and all that runs at 2.5% to 3%.
So interest rates should be around that 3 to 4% all the time. Which means then that self-funded retirees and self-funded people are getting some sort of return from long term deposits which means that bonds are looking better as well and so forth.
Why Is No One Talking About The Last 10% of Empty Houses?
Yeah, that’s a good take. And the next question here, which I actually find this interesting myself is why is no one talking about the 10% of houses in Australia according to the last census that are empty?
There is a few people I know, Pauline Hanson has been on about it for a while. This is an issue that is very divisive. I actually don’t have a problem if you own four houses and three of them are empty because that’s your property. That’s your property. If you can afford to do that, do it.
Would I do that? Never in a million years. But it’s up to the person who owns that property because it’s their property at the end of the day whether they want to have someone live in it or not.
Now, the other side of the point is people saying well, those houses should be taken off them and put into the social housing. No, that is communism, that is exactly what we don’t want to happen.
That is a breakdown of the market. I still think that the market is working okay. It would work a lot better if governments go down the road and let the market actually do what the market is and the market would build more homes. It’s as simple as that.
The other problem is the reason that a lot of supply on homes is restricted is our banks are so heavily geared towards residential property. Now, if residential property dropped because there was a massive flood of new property in the market, prices of property may drop a little bit because of the natural settling of a market economy.
Which means that mortgages that have been extended to people that can’t afford them anyway on property that’s way overvalued and should have never got the loans, the banks would be underwater and would go out of business. And that is the banks lobby heavily to restrict the supply of property because of the mortgage bills.
Is Now A Good Time to Buy A House In A Regional Area?
Yeah. And lastly, I think this will probably be the easiest question you’ve had to answer, but is it a good time now to buy a house in the regional area?
Yeah, they’re going up quick. Bundaberg, where I was last week, six months ago, six, eight months ago, you could have bought a house, $300,000. Now they’re $450,000. 50% increase in some areas. Normally property with big blocks of the old 8-900,000 square metre blocks of land that can be subdivided.
So the investor developer is moving into regional areas. So get on the,if you’re looking to do it. I’d start doing it now.
A place that I found interesting was Port Lincoln, the Bunbury in WA. I would stay away, personally. I like region, as I said, I like regional places, but I like regional places that have steady economies, right, and mining towns that are heavily impacted by fly in, fly out and mine work. They’re really, really good to invest into when mining is doing well.
You look at places like Emerald, Blackwater in central Queensland, Port Hedland, Karratha in WA, where you’re getting rents of 1200 bucks a week on a house that cost you 400 grand. Then you could’ve sold that house for 800 grand. But then all of a sudden, the mining boom finished and you couldn’t sell the house and you couldn’t rent it right, because there’s not an underpinning stable economy.
Places like Bundaberg, Mackay, even on Mackay, gets a bit hit on the mining. But it’s got an underlying industry coming back in now. Rockhampton with the beef industry, Bundaberg with the food industry, the produce industry, Toowoomba, with the agricultural industries. Geraldton WA’s got a fairly stable place.
I don’t know much about southern WA, Darwin because of the military. It’s hard to get a place in Darwin. Townsville, because of the military. Cairns is not what I’m really good on. Harvey Bay in Queensland is not a bad place. It does go through cycles, but they’re not as steep and bad because it’s a great nomad or a retiree market.
But, yeah, look, I can’t see how you can go wrong, especially with housing shortage around and people slowly moving out of the city looking for jobs.