Hotspotting

Hotspotting was among the first to identify and highlight the most significant change in the Australian real estate scene – the emerging trend which we document in the quarterly editions of the report titled The Rise and Rise of Apartments., published in association with Nuestar.   This trend has turned upside down the dominant paradigm in real estate, that houses out-perform apartments on capital growth. There is now growing evidence that attached dwellings are mounting a strong challenge to houses.   It has long been believed that land content was the big thing in driving property values and that units lacked this quality.   Increasingly, it’s clear that this theory about capital growth needs to be re-considered and to acknowledge that attached dwellings like apartments have qualities that houses don’t have and which are important to growing numbers of buyers.   The latest Housing Affordability Report, jointly released by CoreLogic and ANZ, has observed that capital city unit prices increased more over the three months to October 2024, than did house prices over the same period, suggesting a growing preference among home-buyers and investors for units as an affordable option in getting into the market.   The growth difference was small, but it’s merely the latest in a growing set of figures showing the rising performance of units.   In the month of October, the median price growth for units was higher than for houses in the nation’s five biggest cities and also for the combined regions.   This was also the case for the October quarter.   In annual terms, price growth has been better for units than houses in the three capital cities leading the nation on market growth – Brisbane, Adelaide and Perth. Units have also out-performed in the regional markets of Queensland, WA, NSW and Victoria.   The annual growth in median unit prices, according to CoreLogic, has been 18% in Adelaide, 19% in Brisbane and 24% in Perth. Those are spectacular increases and provide compelling evidence to disprove the notion that attached dwellings don’t perform on capital growth.   There are also growing numbers of suburbs around Australia where unit price growth is higher, both in the short-term and the long-term.   The Hotspotting Research Hub shows that at Noosa Heads on the Sunshine Coast, the five-year growth average is 10% per year for houses and 17% per year for units. At Surfers Paradise on the Gold Coast, it’s 8% per year for houses and 12% per year for units.   There are many other similar examples across the nation.   REA Group, which publishes realestate.com.au, has recently highlighted locations where unit price growth is outpacing houses.   Megan Lieu, Economic Analyst at REA Group, says:   “Historically, house values have risen at a faster rate than units, but with affordability pressures, units are being preferred by many homebuyers.”   “In certain suburbs,” she says, “unit prices have grown at more than double the rate of houses over the past year.”   Searches for units on realestate.com.au have also been trending upwards since mid 2020. They now make up close to 40% of all buy searches on-site.   Lieu says that, while the strong performance of units has been evident nationwide, there are areas where demand for units has been particularly high, resulting in significant price increases compared to houses.   In New South Wales, for example, the annual growth in unit values in Engadine, Wagga Wagga and Merimbula has outpaced houses by around 6 percentage points.   In Victorian, Safety Beach, Templestowe Lower and Warragul are examples of locations which have experienced stronger growth in their values compared to houses by considerable margins.   The largest difference in value growth between units and houses in Queensland was observed in the Brisbane suburbs of Waterford, Nundah and Waterford West. Units in Waterford and Waterford West increased at more than twice the percentage of houses in these suburbs in the past 12 months.   PropTrack says that, with housing affordability at its lowest level in three decades, it's to be expected that people are turning to more economical options, especially in suburbs where the gap between house and unit values is significant.   But Hotspotting analysis shows that affordability is NOT the only reason that demand for units is rising. More buyers are choosing attached dwellings for location, for lifestyle and also for safety and security at a time of growing concerns about escalating crime levels.   For all those reasons, each quarter Hotspotting publishes a national report titled The Rise and Rise of Apartments, in association with the leading real estate marketing company Nuestar.   And it proves, emphatically, the units are now a strong option for buyers seeking not only affordability, but strong capital growth as well.

Melbourne’s property market remains the great under-achiever of the nation but that may be about to change.   A number of key indicators suggest better performance by the Melbourne property market is imminent.   One pointer to better times is the latest Property Sentiment survey by API magazine, which recorded a major turnaround in investor attitudes towards the Victorian property market.   The survey asked: Which state or territory do you regard as having the best property investment prospects for the next 12 months?   Mid-year Melbourne and Victoria attracted only 8.6 per cent of respondents who felt it was the best state for property investment.   Three months later in the new survey there was a remarkable turnaround, with 25 per cent identifying Victoria as having the best property investment prospects for the next 12 months.   This ranked Victoria No.2 - above New South Wales and Western Australia, and close behind Queensland in the investment popularity stakes.   One of the attractions of Melbourne is its relative affordability, thanks for the absence of price growth in the past two years.   The latest Home Price Index from PropTrack shows that Melbourne is currently cheaper than Canberra and Brisbane, as well as being well behind Sydney. Melbourne’s median dwelling price is on a par with Adelaide and Perth now.   Sydney’s median dwelling price is $1.1 million, compared to $790,000 in Melbourne.   There is a growing perception that Melbourne is now affordable and poised for capital growth that would return it to its more familiar spot sitting a little ehind Sydney as the country’s priciest market.   Indeed, the latest PropTrack price report notes recent evidence of a turnaround for Melbourne. It says:   “Price falls have started to reverse in Melbourne, with buyers out in force for the peak of spring selling season. Prices rose 0.5% in October, the highest monthly growth rate among the capital cities.”   Other factors suggesting that Melbourne is due for a period of stronger property market performance include population growth (fuelled by overseas migrants and international students), a solid economy and a significant program of major infrastructure developments.   The latest edition of the State of the States report from CommSec ranked Victoria No.4 among the state and territory economies, ahead of NSW, the ACT, Tasmania and the Northern Territory. The report said the greatest strength of the Victoria economy is the level of construction work.   The latest population data from the ABS shows Victoria had the second highest growth rate among the states and territories in the year to March 2024, rising 2.7% compared to the national average of 2.3% - and bettered only by Western Australia.   In raw numbers, Victoria added more to its population than any other state, ahead of NSW and Queensland.   Jacob Caine, President of the REIV, says Victoria has always been an attractive destination for overseas and interstate migration.   Caine says: “Melbourne’s reputation as one of the most liveable cities is well deserved.   “We have a growing population and growing demand for rental properties with new residents more likely to rent before buying.   “The challenge in Victoria is a lack of housing supply, and the need for Government to build a stronger policy platform that will attract new property investors to meet the needs of the market.”   One positive policy from the State Government is the recent announcement that the stamp duty concession for off-the-plan properties in Victoria has been extended to investors - and the price cap removed for home buyers, albeit temporarily.   This has been largely welcomed by the sector, as offering a much-needed boost to development.   New data from off-the-plan property portal, urban.com.au, has shown a “massive spike in interest” for Victorian off-the-plan projects after the concession’s announcement, reporting an immediate 123 per cent increase in direct online enquiries, and a fivefold increase in online traffic volume.   Another factor in favour of investors is the reduction is the number of rental properties available, putting upward pressure on residential rents.   For the first time since records began in 1999, Victoria’s active rental bonds dropped significantly over the 12 months to June 2024, signalling a significant shift in the state’s rental market.   There are now 22,000 fewer rental properties in the market than a year ago.   Victoria’s high property taxes and stricter rental property standards have made owning investment properties less attractive. These factors, combined with sustained higher interest rates, have driven many landlords to sell off their properties.   Melbourne’s metro areas have experienced the largest declines, with more than 20,000 fewer rental properties, a 3.7% year-on-year decrease. Regional Victoria saw a smaller drop of around 1,000 properties.   Every Melbourne LGA saw rents rise in the past year, with some regions experiencing increases of nearly 20%. Overall, rents are (on average) 7.5% higher than a year ago, creating affordability challenges for tenants.   Another positive for the state is that Victoria currently leads the nation in first-home buyer activity, accounting for 32% of new loans.   Victoria’s population is projected to grow significantly over the next five years, further increasing demand for rental properties. The shrinking rental market, combined with rising construction costs and fewer new developments, could exacerbate housing affordability issues for both renters and buyers.   The Australian Financial Review reported earlier this month that “Melbourne’s housing market could outperform Sydney and other capital cities once it emerges from its current downturn, boosted by a marked improvement in affordability after years of weak growth”.   Nicola Powell, Domain’s chief of research and economics, says: “In the next cycle, we’re likely to see Melbourne overperform because it has underperformed significantly compared to other capital cities since March 2020.”   AMP capital’s chief economist Shane Oliver says he expects Melbourne prices to grow more than Sydney’s in the next upswing.   Oliver says: “Melbourne’s been lagging for some time, but this has made the property market relatively cheap compared to Sydney and the other cities. Because of its relative underperformance, it could bounce back a little bit quicker and sharper.”   At Hotspotting, our assessment is that many of the key parameters and indicators are lining up to boost the growth prospects for Melbourne and Regional Victoria in 2025. The city and the state generally are overdue for a period of price growth.

I have frequently highlighted the poor track record of economists in predicting outcomes in real estate markets across Australia – and in particular the embarrassingly bad record of economists working for the Big 4 banks and for other major institutions like AMP Capital.   Their forecasts for house prices at the beginning of each of the past five years have been so far off the mark, it’s puzzling that the big-name economists who made these blunders have kept their jobs.   Because what these outcomes mean is that these boffins have a very poor understanding of residential real estate – and that, after all, is a significant part of what they are paid their fat salaries to be good at.   The most puzzling thing is that there’s a clear and obvious reason they always get it wrong – they think that the major determinant of house prices is what’s happening with interest rates.   Big bank economists cling to their pet theory that if interest rates are high and /or rising, prices will fall. And if interest rates are low and /or falling, house prices will rise.   In the mindset of these over-rated and over-paid bureaucrats, nothing else is in play. Not economic growth, not government stimulus, not population trends, not major infrastructure investment, not basic supply and demand factors, nor new and emerging trends like the Exodus to Affordable Lifestyle or the Rise and Rise of Apartments.   For them, it’s just interest rates. I know primary school kids with a more sophisticated understanding of real estate dynamics.   If the bank boffins were worth their salaries they would have noticed what happened with national property prices in 2023 and again in 2024, in both cases years of solid growth, in defiance of their forecasts that prices would crash because interest were rising or persistently high.   But beyond recent history, a quick study of past decades shows that their theory about interest rates and property prices is a false and failed philosophy.   Throughout the past 40-50 years, property markets in Australia have pretty much done the opposite to what the modern economist mindset suggests SHOULD happen.   The highest interest rates in my lifetime occurred in the 1980s. Throughout that decade mortgage rates were commonly above 10% and went as high as 17-18% towards the end of the period.    And yet some of the biggest property price growth in the nation’s history occurred during that period of insanely high mortgage rates – with the capital city median dwelling price rising 141% - from $59,000 in 1980 to $142,000 in 1990.    The growth in the second half of that decade, when interest rates were at their highest, was 75% - with the median dwelling price lifting from $81,000 to $142,000.   Interest rates were much lower during the 1990s, but dwelling values grew at a much slower rate in that decade, rising just 46%. So, to repeat, prices grew 141% in the 1980s with record high interest rates (up to 18%), but grew only 46% in the 1990s with interest rates much lower, down as low at 7%.   The early part of this century was another period of rising interest rates, but price growth picked up – rising 114% from 2000 to 2010.   Interest rates were considerably lower between 2010 and 2020, but the rate of price growth slowed significantly, compared to the previous decade when mortgage rates were higher.   The median dwelling price rose only 20% between 2010 and 2015, and just 23% between 2015 and 2020, despite mortgage rates getting down to around 3%.   Since 2020, we’ve seen dwelling prices grow much faster – up 36% overall in four years, despite the recent period of high and rising interest rates.   It’s pretty clear, isn’t it – so clear, in fact, that even a bank economist could understand it. Since 1980, dwelling prices have done the opposite to what bank economists say they should do – they have risen most strongly when mortgage rates have been high and the price growth has been weakest when interest rates have been low.   There have been one or two exceptions and aberrations along the way, including in 2021 when we experienced high price growth at a time of low interest rates, but that was generated by a host of other major influences, including government stimulus measures.   Beyond that, what the data tells us again and again, is that we’re more likely to have rising property prices when interest rates are high and rising.    And, when you think it through, it makes perfect sense – we get rising interest rates when the economy is strong, unemployment is low and consumers are spending – in other words, the sort of circumstances when people are more likely to be out buying real estate.   For the record, how much have Australian dwelling prices grown in the 44 years since 1980? They’ve grown, on average, 1440 per cent.   There’s been some level of growth in every five-year period since 1980, quite oblivious to what’s been going on with interest rates.   Right now, there’s lot of speculation from economists and other commentators that when the Reserve Bank eventually cuts the official rate, perhaps early in 2025, it will ignite property markets and cause property prices to rise.   These kinds of views, repeated multiple times in news media every day, have resulted in most people believing that property markets are indeed driven by events with interest rates.   History, including recent history, proves it simply isn’t so.

The Property Playbook is a dynamic real estate show that empowers investors and professionals with the insights and strategies needed to achieve strong returns in the Australian property market. Hosted by Tim Graham & Terry Ryder from Hotspotting.   In this episode, Tim Graham is joined by Ben Kingsley, Chair of the Property Investors Council of Australia. to discuss advocacy work for property investors amidst legislative changes and their impact on the housing market. Ben emphasises the need for balance in tenant rights and business returns and dissects the consequences of legislative changes in rental accommodation supply.   https://tickernews.co/shows/the-property-playbook/

It’s been 15 months since Prime Minister Anthony Albanese made his big announcement about fixing the housing shortage – but there has been, as yet, no progress in lifting rental vacancies and suppressing rental growth.   The press conference making the announcement that the Federal Government would build 1.2 million new homes in five years was held in August 2023 – but more than a year later it’s clear that little progress has been made and that rental vacancies are not improving.   The latest figures on vacancy rates from SQM Research shows the national vacancy rate at 1.2% In October, unchanged from September and only a fraction higher than a year ago.   Five of the eight state and territory capital cities actually recorded a month-on-month reduction in their vacancy rates, while two others recorded no change.   The only capital city to have an increase in vacancies was Darwin.   Overall, the number of properties available for rental has dropped from almost 38,000 in September to 36,500 in October.   To put that in context, in December 2016 – the last time Australia had a vacancy rate close to 3% - there were 90,000 homes available for rent across the nation.   And Australia has added about three million people to its population since 2016.   Compared with a year ago, when the Federal Government was spruiking its big fix to the shortage of homes, five of the eight capital cities still have vacancy rates at similar or the same levels – and one, Hobart, is significantly lower than 12 months ago.   The highest vacancy rate among the eight capital cities is Canberra at 1.7% - the same as it was a year ago and significantly lower than the benchmark 3% which is considered in the industry to represent a balanced rental market with stable rents.   Now, a year is a long enough time for a government to move the dial on an issue like the rental shortage. Australia could improve this situation almost overnight by implementing measures to encourage and incentivise Australians to become landlords.   The big problem, which has been building now for many years, is that the nation has a chronic shortage of people willing to take on the task of being landlords – buying an investment property and making it available for others to live in.   Government doesn’t perform this role and neither does big business. Over 90% of the homes that people rent in Australia are provided by mum-and-dad investors – but fewer and fewer people are willing to do it, at a time when the costs of doing so are unattractively high and the rules and regulations keep changing to the distinct disadvantage of the owners.   Governments caused this rental shortage and they keep making it worse. So rental vacancies are unlikely to improve in the foreseeable future.   And while that remains the case, there will continue to be upward pressure on rents and an absence of choice for people who need to rent or choose to rent.   Four years ago, the median weekly rent for a house in Australia was around $440 – today it’s over $700.

There are multiple reasons why Australia has a housing shortage and why the numbers of new dwellings needed are simply not being built. This is something I have spoken about regularly in the past and will continue to do so, as it’s the core issue creating problems for real estate consumers of all kinds – home buyers, investor buyers and tenants. Here are the latest events and announcements which help to explain why we have a housing shortage with rising prices and rising rents, problems which are not going to be fixed in the foreseeable future … ITEM 1 – BUREAUCATIC DELAYS: Sydney councils are sitting on backlog of almost 8,500 unresolved development applications and requests for development certificates, according to NSW government data. There are over 5,000 unresolved development applications across the Greater Sydney area, plus 3,300 active “complying development certificates”. Five councils each have more than 300 local development applications that are waiting to be finalised. Data from the Department of Planning Housing and Infrastructure lists the Inner West Council as the worst offender, with 456 “active” DAs waiting for a determination. The Northern Beaches, Hills Shire and Cumberland Councils also have major backlogs. Thousands more “complying development certificates” are also adding to the backlog, despite being designed to give faster approvals to developments that meet certain requirements. Some councils are taking more than a year to approve homes. And some developers are waiting up to a decade for projects to be approved. In my view, one of the core issues is that many councils have a NIMBY attitude to development, especially high-density residential. They simply don’t want developments to be built and do everything they can to frustrate builders. ITEM 2 – NOT FINANCIALLY VIABLE: In Perth, the rate of apartment completions has dropped to its lowest levels since records began in the 1980s. A new Property Council report says that, to meet the housing targets set by the National Housing Accord, WA would need to be delivering five times the number of apartments per year that it currently is. The Sky High report says there are more than 10,000 apartments approved for WA but effectively on hold and unable to be constructed. The major issue is that projects are just not financially viable – because the cost of delivering an apartment is generally higher than the market is willing to pay, so projects simply don’t stack up. Only luxury apartments are economically viable projects. The report blames climbing construction costs - driven by labour shortages and competition for labour from government and mining sectors. The report says: “Developers are reporting that construction cost estimates are now almost double the cost of similar developments five years ago.”  The Property Council expects that costs will climb even higher as the new national construction code and bargaining agreements imposed by government take effect. This is problem not only in Perth but right across Australia. Developers are scrapping unit projects because the costs are so high, making them financially unviable. The Australian Construction Industry Forum says it’s a worrying trend for a country that needs more, denser homes – not only apartment towers but medium-rise and townhouse developments in existing suburbs – to tackle the chronic undersupply of housing and to ensure longer-term affordability. The forum’s Construction Forecasting Council chair and chief economist Nerida Conisbee says: “It’s very, very expensive to build apartments. Many projects aren’t going ahead.” ITEM 3 – WORKER SHORTAGES: A recent report reveals that Australia needs 130,000 additional workers to combat labour shortages in the construction sector. This has prompted calls for rapid reforms from both federal and state governments to attract and retain skilled labour. The report says the nation is on track, in 2024, for the worst year in new home builds in over a decade, with an 9 per cent decline in new building starts, totalling just 158,000 when it needs to be 240,000 per year to meet the Federal Government’s fanciful target of 1.2 million new homes in five years. Construction starts for detached houses have dropped by 10 per cent, while higher-density projects have declined by 6 per cent. If this pace continues, Australia could see fewer than 800,000 new home starts over the five years, leading to a shortfall of over 400,000 homes compared to the National Housing Accord target. The decline in apprenticeship numbers further compounds this crisis, with completions down 8 per cent and commencements down 12 per cent in the past year.  ITEM 4 – POLITICAL POLICIES: The Housing Industry Association says a home building recovery is possible because buyer demand is rising, but state government housing policies risk stalling the revival. HIA Senior Economist, Matt King, says demand for new homes nationally is accelerating - largely due to high population growth, low unemployment, stable incomes and the absence of interest rate rises for the past year. King says activity generally is picking up, but there are big differences across capital city and regional markets. Sydney remains an outlier and there is still no indication of a near-term rebound in residential building in the big city. King says: “New home building in the Sydney basin remains exceptionally low, primarily due to high land prices and excessive housing taxes and infrastructure charges.” Australia-wide, the HIA says the detached home building sector looks promising, but the unit sector remains constrained and is unlikely to experience recovery before mid-2025.  King says: “The sector continues to be dampened by skilled labour shortages, business credit constraints and the aftermath of significant building material cost escalation.  “The extent of the recovery in new home building will be determined by the ability of governments to ease the barriers to home building. “Recent state government plans to increased surcharges on foreign investors and introduce taxes on short-term rental accommodation are unhelpful at a time when stability is needed to achieve the target of 1.2 million homes.” King says the rate of home building is being slowed down by government failure to implement policies such as expedited land releases, concessions on property taxation, and accelerated development approval time frames. ITEM 5 – HIGH LAND COSTS:  The rapidly prising cost of home sites is one of the biggest barriers to easing the housing shortage. New figures for South East Queensland indicate that the cost of residential home sites has jumped by as much as $120,000 in a year – up 21 per cent in one LGA where it now costs as much for a block of land as the median home did just two years ago. This is the City of Brisbane LGA where land prices rose 8.7 per cent in the September quarter alone, pushing the median price of a block of land to $685,000 – which is $3,000 more than what an established home cost in this area in June 2022. The second biggest annual surge in land prices occurred in the City of Ipswich where the median block rose 15 er cent or by $48,000 to hit $360,000, with the third fastest pace set by Moreton Bay, where prices rose by 10 percent to $415,000. The cheapest blocks of land in South East Queensland are in Logan City in Brisbane’s south, where a third of SEQ land sales are now occurring – with the median price at $350,000 after a rise of almost 10 percent across the year.  The Gold Coast had the second highest SEQ land price at $619,000, after an 8 percent rise in the past year. So, you can imagine what a new house on a block of land costs, when the land alone costs well over $600,000 – as it does in the City of Brisbane and on the Gold Coast. Why does it cost so much? Primarily because of bureaucratic delays, governments taxes fees and charges, and high interest rates – all problems created by our elected representatives.

If I asked you to nominate the market which had recorded the best long-term capital growth in Australia, what would your answer be?   Sydney, the capital city with the nation’s highest property prices?   Perth, which has had a booming property market lately and has led the nation on price growth for past couple of years?   Brisbane, which always attracts strong demand from buyers of all sorts?   Or perhaps Regional Queensland, which benefits from internal migrants moving from others parts of Australia and from investors seeking affordability and strong yields?   The correct answer is none of the above.   The market jurisdiction which has led the nation on long-term capital growth is: Regional Tasmania.   This is the outcome of research conducted by the Property Investment Professionals of Australia (PIPA), which analysed Australian Bureau of Statistics’ data on established median dwelling values over 20 years - from June 2004 to June 2024.   The top location recorded growth of 233% while the worst grew 100% over the two-decade period.    In comparison, over the past 20 years, the stock market (S&P/ASX 200) increased by 120%, according to investing.com.   In general terms, the best capital growth has been smaller capital cities or more affordable regions.    The top result was “the Rest of Tasmania”, which means Tasmania outside of the capital city Hobart or Regional Tasmania - where its established median house price rose from $169,000 20 years ago to $449,000 in mid-2024.    The best capital city performers were also some of our nation’s most affordable throughout the period with Adelaide, Hobart, and Brisbane taking out the top three city rankings.    PIPA comments that property markets are not linear – rather, price growth occurs at varying points over time. Hobart, for example, has experienced a softening of prices over the past few years, but its house price have almost tripled since 2004 – up 193% in 20 years.   Adelaide and Brisbane have both had very strong markets in the past two years but both had long periods of flat-lining prices throughout the past two decades.   It reflects the reality that real estate consumers get the best results through long-term ownership and PIPA Chair Nicola McDougall says property owners should always adopt a long-term mindset.   But PIPA research indicates many investors don’t follow that philosophy.   PIPA’s 2024 Annual Investor Sentiment Survey found that 61% of investors who sold in the past year had a holding period of less than 10 years – and 17% of those investors who sold indicated they had owned the property for less than three years.    So the rankings from the PIPA research on capital growth over the past 20 years are: 1 Regional Tasmania 2 Adelaide 3 Hobart 4 Brisbane 5 Regional Victoria 6 Perth   Sydney ranked seventh and Melbourne 11th, once again disproving one of the real estate’s greatest myths, that you get the best capital growth in the biggest cities – and that prime out-performs affordable.   And the worst performers were Darwin and “the Rest of Northern Territory” – but even the remote markets of the NT achieved a doubling of property values over 20 years.

The Property Playbook is a dynamic real estate show that empowers investors and professionals with the insights and strategies needed to achieve strong returns in the Australian property market. Hosted by Tim Graham & Terry Ryder from Hotspotting. In this episode, Tim is joined by Hotspotting Founder and Director Terry Ryder. As an experienced real estate expert, Terry Ryder shares insights on identifying prime real estate investment locations in Australia. He introduces the Price Predictor Index, a model that predicts short-term property growth based on sales volumes. Ryder emphasises the significance of monitoring buyer activity, infrastructure investment, and market size when identifying promising real estate markets. https://tickernews.co/shows/the-property-playbook/

Welcome to a special episode of Hotspotting’s pre-recorded interview series, Interviews with the 1%, where we dive into the strategies and journeys of Australia’s top investors—the elite 0.87% who own five or more properties. Hosted by Tim Graham, this series brings you invaluable insights from seasoned investors who have achieved what many aspire to. In today’s episode, we sit down with Lisa Chapman—a property entrepreneur, investor, and co-creator of the luxury retreat, Eden Yarra Valley. Lisa shares her journey from a high-powered corporate career to becoming a full-time property entrepreneur, carving a unique niche in the accommodation and real estate sectors. What You'll Learn in This Episode: The Mindset of the Top 1%: Discover what separates successful investors from the rest, as Lisa reveals her strategies and lessons learned from owning multiple properties. Lisa’s Property Journey: From buying her first house at 22 to establishing diverse real estate ventures across the Yarra Valley and the Mornington Peninsula. Creating Eden Yarra Valley: Hear the inspiring story of transforming a run-down property into a high-end retreat that caters to milestone events, weddings, and corporate retreats. Navigating Career Transitions: Insights into Lisa’s pivot from a high-stress corporate career in PR and real estate marketing to her fulfilling role as a property entrepreneur. Tips for Aspiring Investors: Practical advice for those looking to build their property portfolio, including lessons from Lisa’s successes and challenges. About Lisa Chapman: Lisa Chapman’s remarkable career spans television, marketing, public relations, and real estate. She managed national and global campaigns, including the iconic launch of Melbourne’s Eureka Tower and Skydeck. After decades of corporate success, Lisa made a bold shift during the COVID-19 pandemic to focus on her passion for real estate and the Experience Economy. Today, Lisa is the proud co-creator of Eden Yarra Valley, a luxury retreat offering bespoke accommodation for up to 30 guests. From weddings to wellness retreats, Lisa’s innovative approach to property investment highlights the value of creating meaningful experiences for clients. Key Takeaways from Lisa’s Story: The Power of Vision: Lisa’s ability to see potential in underutilized properties has been central to her success. The Value of Experience: Transitioning from corporate PR to property entrepreneurship, Lisa leveraged her marketing expertise to create a standout brand. Lessons from Investing: Lisa shares actionable advice for both new and seasoned investors, including how to identify opportunities and manage challenges. Notable Quotes: “We are living in the Experience Economy. Today, people are looking to invest in meaningful moments, not just material assets.” “Real estate is about creating value—whether it’s a luxury retreat or an investment property. The potential is there if you’re willing to look.” Connect with Lisa Chapman: Website: edenyarravalley.com.au Email: lisa@edenyarravalley.com.au Subscribe to Hotspotting’s Podcast: Stay tuned for more episodes of Interviews with the 1%, where we uncover the stories behind Australia’s most successful property investors. Don’t forget to like, share, and subscribe on your favorite podcast platform!

Host: Terry Ryder, Founder of Hotspotting.com.au Guest: Steve Palise, Commercial Property Expert and Founder of Palise Property In this insightful webinar, Terry Ryder sits down with Steve Palise to explore the exciting world of commercial real estate. With decades of combined experience, Terry and Steve unpack key trends, strategies, and opportunities in non-residential property investment. Whether you’re a seasoned investor or just starting to consider commercial property, this session is packed with actionable insights. Topics Covered: Why Investors Are Turning to Commercial Real Estate: Higher yields, flexibility, and unique financing options make commercial property an attractive choice.Types of Commercial Properties: Industrial, retail, and office spaces—what to look for and how to assess opportunities.Key Market Trends: Vacancy rates, regional hotspots, and the impact of infrastructure projects on property value.Risk Management: The importance of due diligence, understanding leases, and analyzing tenant dynamics.Investment Fundamentals: How residential market indicators can inform commercial property decisions. Key Takeaways: Superior Yields: Learn how net yields in commercial real estate often surpass those in residential investments.Market Nuances: Discover why regions like Brisbane and Perth offer exceptional opportunities for commercial investors.Educational Resources: Steve shares free tools, checklists, and courses to help investors navigate the complexities of commercial property. 💡 Thinking about investing in commercial property? This webinar will help you understand the landscape and take your first steps toward creating a diversified, high-performing portfolio. 🎧 Listen to the Podcast: Stay updated on all things real estate by subscribing to our podcast on your favorite platform. 🔗 Connect with Us: Visit Hotspotting.com.au for more resources.Visit PaliseProperty.com for more information on Steve's business. You can also access Steve's Commercial Property Course by visiting: https://www.commercialpropertyinstitute.com.au/ Use the code word Hotspotting to receive a 100% discount!

There are many reasons Australia has a dwelling shortage and affordability problems – including the increased time it takes to build a new home. In recent years, it typically took around nine months on average to build a house in Australia. Today it takes 13 months. It’s worse for businesses which are constructing apartment complexes. Recent analysis from Master Builders Australia has revealed that building times for detached homes and apartments have almost doubled – with a consequent impact on costs. Master Builders says: “It shouldn’t take this long to build a home”. These findings, obtained from recent analysis of Australian Bureau of Statistics (ABS) data, show that it took an average of 13 months to build a detached house in FY2024, marking a 40 per cent increase on the average compared to a decade ago. Master Builders noted that construction times had lengthened even further for apartment buildings, with the average of 33 months from approval to completion in FY2024, representing an 80 per cent increase on the average of 18.5 months observed in FY2011. That warrants repeating: it previously took a year and a half to get the average apartment building completed, but now it takes almost three years. And that’s the national average situation: it’s considerably worse in some states. You don’t need to be a financial genius to understand what that does to the costs of building new homes in Australia. CEO of Master Builders Australia, Denita Wawn, says these extended construction time frames are hindering the industry’s ability to address housing demand and confront the housing crisis. She says: “There are a range of contributing factors including labour shortages, declining productivity, union pattern agreements, supply chain disruptions, complex regulatory requirements, occupational certificate backlogs and critical infrastructure delays.”  Wawn points out that, with the advancements which have occurred in technology and construction methods in recent years, “we should be building homes faster, not slower”. Master Builders called for action to be taken to address the bottlenecks and inefficiencies around construction processes. They suggest streamlining government approval processes, encouraging adoption of digital solutions, introducing incentives to grow the workforce through domestic and international means, and strengthening the domestic supply chain. Master Builders chief economist Shane Garrett says that the latest ABS data on home completions indicate the country is on track to fall well short of the National Housing Accord target of 1.2 million homes by 2029 – indeed, by “over 400,000 homes”.

It’s long been the case that the two most populous states, New South Wales and Victoria, have attracted the highest levels of property investment – just by sheer weight of numbers. But Victoria has lost its spot among the big two of property investment and is now being overtaken by Queensland. Meanwhile, Queensland now leads the nation is overall real estate transactions, including purchases by both home-buyers and investors. This is despite Victoria having a population of 7 million, versus 5.5 million in Queensland. It provides further evidence that investors are deserting Victoria because of the raft of anti-landlord measures from the State Government, with more still to come. And that Queensland is where buyers are all kinds are heading. Analysis of ABS figures shows that, a year ago, 26 per cent of investor loans were for Victoria properties and around 22 per cent for Queensland. More recently, the balance has shifted with Victoria dropping to 23 per cent of investor loans and Queensland continuing to rise. Money.com.au says investors are abandoning Victoria for several reasons, including Victoria’s additional taxes on investors, and are flocking to Queensland. Home Loans expert Mansour Soltani says: “Queensland is emerging as the new promised land. It has everything property investors look for including a strong local economy, population growth, expanding regional markets and ongoing infrastructure projects.” Queensland is leading the nation with a 36 per cent year-on-year increase in investor loans, compared with the national average of 21 per cent.  Regional markets such as Townsville, Bundaberg, Rockhampton and Gladstone are offering low entry costs and above-average rental yields. Soltani also says: “Queensland is not only leading investor activity — owner-occupied loans in the state grew by 12 per cent year-on-year, while no other market grew by more than 6 per cent, and New South Wales saw no growth.” Realestate.com.au reports that nearly $40 billion was spent on residential property in Queensland in the past quarter, with the state recording the highest number of home sales in the country in the last three months. Brisbane’s median dwelling price has also extended its lead over Melbourne’s — climbing to $885,000 in October, while Melbourne sits at $780,000, according to CoreLogic. New figures from digital settlements platform, PEXA, show over 48,000 home sales were finalised across Queensland in the September quarter, with home buyers spending $38 billion — 27 per cent more than the same period a year ago. The postcodes with the highest number of home sales in the three months were found in Toowoomba, the Gold Coast and Mackay. Homebuyers also moved to regional coastal areas such as Bargara near Bundaberg and Urangan in the Hervey Bay region, as well as new housing development areas in Logan City and Ipswich City on the fringes of Greater Brisbane.

Whenever I’m asked for my rules for successful investing, I usually begin my response with this: Rule One – stop reading newspapers. Expressed in a more 21st Century context, stop treating media soundbites as research. People who base their investment decisions on the white noise in news media are running the risk of making very bad moves in the market. My observation of the content of news media coverage of residential real estate is that there is far more misinformation than real, accurate, reliable information. In modern media it’s all about clickbait and I find repeatedly that the headline presented to induce you to CLICK is highly misleading – and sometimes an outright lie. I could provide dozens of examples from this week alone, but here’s just one classic example. The headline above an article published on the news.com.au network, the nation’s biggest news organisation, proclaimed: “Worst is over: where rents are plummeting” This was followed by the following opening statement: “The worst of the rental crisis appears over across much of Australia, with rents plummeting in these areas. But it’s not all good news.” Now the headline in this case is more than a lazy piece of sensationalism – because, not only is it untrue to claim that “rents are plummeting” but the content of the article does not support the claim in the headline. You may have observed that, in the surreal world of journalists, nothing falls or decreases or drops – it collapses, it nosedives, it falls off a cliff – and, yes, it plummets. Even when the decline is a few percent, barely a blip, it will be declared to be plummeting. So having made the statement that rents were plummeting and that the worst of the rental shortage crisis was over, the New Limited article utterly failed to deliver on this very big statement. If it was true, it would be one of the stories of the year. But, of course, it wasn’t true. According to the article, Queensland’s asking rents “have surged again, increasing across 252 Queensland suburbs by up to 15 per cent since June”. I’ve checked my dictionary definition of “plummeting” and it certainly doesn’t apply to the Queensland situation. Next, Victoria. According to this article, there are more than 200 suburbs where rents are now at least $100 a week more expensive for units than in 2021.  It said: “Well-connected areas like Ashburton, Parkville, Aspendale, Caulfield South, Glen Waverley and Carlton have posted some of the biggest rises in weekly unit rents across the past three years, all of them up more than 40 per cent, according to new PropTrack data.” No sign of anything plummeting in Victoria – where, incidentally, many investors have sold up and got out of the state because of draconian anti-landlord measures by the state government. So we can expect rents to keep rising in Melbourne. In Adelaide, rents have fallen a little in the latest quarter in 17% of suburbs examined by PropTrack, but there’s no sign of plummeting in the other 83% of suburbs.  Adelaide, in fact, has had extraordinary growth in rentals in the past year and, with the vacancy rate still hovering around 0.6%, there’s no real basis for declaring that “the worst is over”. In Perth, the vacancy rate remains well under 1% and there is no real prospect of rent relief any time soon. So, looking through the entire article, the only evidence presented to go even close to supporting the noise in the headline is in Sydney. According to this shoddy piece of “journalism”, Sydney has entered a correction phase. PropTrack attributes the market slowdown to more rental homes becoming available and tenant demand dropping as more renters moved to share houses or back in with their parents to save money. Migration has also waned in recent months. PropTrack says: “Demand and supply are working together to see a stabilisation in rental market conditions.” But no evidence was presented in the article to support the notion that Sydney rents are nosediving. So, in summary, only in Sydney is there evidence that “the worst is over” and there is nothing at all in this work of fiction is justify the claim that rents are plummeting – anywhere. So, what is a realistic overview of the situation with the rental shortage crisis. Nationally, the vacancy rate continues around 1% or slightly above 1%, depending on whose figures you believe. None of the eight capital cities has a vacancy rate anywhere near 3%, which is the benchmark for a stable rental market with steady rents. There are no government measures in play which will move the dial on this in the foreseeable future – except decisions which are likely to make it worse, rather than better. In some locations, however, I do expect rental increases to moderate, because a ceiling has been reached in terms of the market’s ability to pay. Amid a cost-of-living crisis, tenants cannot keep paying higher and higher rents, regardless of how many people they jam into a three-bedroom house or small apartment. But rents plummeting? We’re unlikely to see that anywhere, not while vacancies are as low as they are.

At Hotspotting we believe real estate markets are local in nature and are subject to the strength or weakness of the local economy. While economists cling to their kindergarten theory that markets are essentially driven by interest rates, the stark differences in local markets across Australia suggest that there is something more powerful in play. If it were true that high interest rates mean prices will fall, then everywhere in Australian would have falling property prices in 2024, which is what major bank economists and others like them predicted at the start of the year. The reality that Perth, Brisbane, Adelaide and many key regional centres have had booming property prices indicates that (a) the economists are wrong in their simplistic theory; and (b) there are larger forces of influence, which are local in nature. And the record shows that the local economy is the key factor, over-riding any influence from interest rates, which are the same everywhere in Australia. For that reason, I always take note the quarterly editions of The State of the States report published by CommSec, which is part of Commonwealth Bank. For many years I’ve detected a correlation between the findings of that report and outcomes with property prices in our capital cities and our regional markets. The report uses eight different metrics, including construction work, population growth, retail spending, housing finance and employment data, to rank the eight state and territory economies. The latest quarterly edition of State of the States ranks the states and territories like this: Western Australia 1, South Australia 2, Queensland 3. Not coincidentally, the leading cities with booming property prices are, in order, Perth 1, Adelaide 2 and Brisbane 3. In addition to that, the leading regional markets are Western Australia, South Australia and Queensland. The report finds that the greatest strength for WA is population growth while the greatest weakness is dwelling starts – and those two factors working together would tend to put upward pressure on property prices (and rents). South Australia’s greatest strength is economic growth while in Queensland it’s housing finance. The jurisdictions with the weakest economies – the Northern Territory, the ACT and New South Wales – are also the places where property prices have been weak recently. So if you want a simple method of detecting where dwelling prices are most likely to be strong, keep track of the quarterly editions of the State of the States report.

Household wealth in Australia keeps rising and it’s residential property that’s responsible. The latest figures from the ABS show that overall household wealth has increased for the seventh consecutive quarter. It rose a further 1.5 per cent in the June quarter to a record $16.5 trillion, driven primarily by property assets.  Total household wealth is now 9.3 per cent higher than it was a year ago, driven by residential land and dwellings. Of the 1.5 per cent rise in the June quarter, 1.3 percentage points was attributed to residential property – our homes and investment properties. Dr Mish Tan, head of finance statistics at the ABS, said: “House prices have continued to rise across most states and territories. “This largely reflects ongoing housing supply constraints and an uptick in investor activity over the quarter.” Residential real estate assets now account for approximately two-thirds of total household wealth. Property assets reached an unprecedented level of $11.22 trillion as of 30 June, making up around 68 per cent of household wealth, driven by rising property prices. Households also hold $1.72 trillion in cash and deposits or 10.4 per cent of their total net worth, alongside $3.94 trillion in superannuation assets.

Everyone seeking real estate in desirable locations has the same complaint: the lack of stock. Home buyers, investors, buyers’ agents and selling agents are all being frustrated by the shortage of listings of properties for sale – particularly quality options. Leading national buyers’ agency Adviseable says a partial solution for buyers is to consider building from scratch rather than buying an established property. The tactic has many advantages – and one or two problems as well. Alex Dutt of Adviseable says deciding whether to buy an established property or to go down the new construction route is not always a simple choice. It can be difficult to cut through the noise and find a truly unbiased insight into the topic to determine which strategy is the right one for you. Adviseable has put together an honest, warts-and-all exploration of the pros & cons of buying an established investment property versus going through the process of building a new one. And on Wednesday 30th October, Alex Dutt joined Hotspotting founder Terry Ryder to discuss the issues involved in making that choice. He points out that Adviseable, as a buyers’ agency, has no vested interest in which choice an individual buyer makes. So it can present the advantages and disadvantages without fear or favour.   www.adviseable.com.au

In my experience, most people who have a loud view about scrapping negative gearing are people who can’t explain what it is, how it works, why it’s bad and how ending it would solve all the problems in the housing industry. Mostly, what’s in play with this issue is THE POLITICS OF ENVY – that nagging feeling some people have, that others are doing better than they are, or are receiving benefits that they are not, and therefore need to be squashed. As a famous Indian guru once observed, some people try to be tall by cutting off the heads of others. Contrast that with the views that are expressed when they come from people with the expertise and experience to understand what negative gearing is, how it works and what the consequences would be if it was removed. A recent poll of such people found that the disadvantages would outweigh the advantages. Before delving into the comments of experts who have been interviewed by news media about this recently, let me remind everyone that Australia DID end negative gearing in the 1980s and within two years the same Federal Labor Government that scrapped it, did a major backflip and reinstated it. Why? Because it caused a serious shortage of rental properties and higher rents. And it didn’t bring down property prices or improve housing affordability. Let me also remind you that more recently New Zealand put an end of negative gearing tax benefits and right now that nation’s government is reinstating it – because, as happened in Australia in the 1980s, the upshot was a rental shortage and higher rents. In the light of those precedents, you have to wonder why we’re having this debate at all. Now, returning to a recent survey of so-called experts polled by the Australian Financial Review – the majority view, arising from that survey, was that the consequences of changing tax arrangements for property investment are likely to include higher rents. Why? Because investors would exit the housing market, causing a further drop in supply of rental homes at a time when Australia has the lowest vacancy rates ever recorded. Analysts polled in the quarterly Australian Financial Review property survey, overall, painted a “BE CAREFUL WHAT YOU WISH FOR” scenario amid a national debate over the merits of changes to negative gearing and capital gains tax – which is usually described by media, inaccurately and unfairly, as a CONCESSION. Those polls said any benefit to first home buyers from any price falls – which are hypothetical and not based on any precedent or research - as investors exit the market would be modest, potentially short-term and effectively traded off against a consequent squeeze in supply. Here’s one prediction from a respondent to the survey: He says: “By lowering the after-tax return to investors, any move to wind back the negative gearing benefit and increase capital gains tax would lead to a fall in investor demand for housing and a short-term fall in prices, say of 3-4 per cent.”  However, those comments from Australia’s worst forecaster of residential property outcomes, AMP chief economist Shane Oliver – so the forecast that property prices would fall is somewhat dubious. That certainly didn’t happen in Australia in the 1980s or in New Zealand after they, more recently, ended negative gearing. In any case, Oliver goes on to say: “However, this (slight fall in prices) is likely to be short-lived as less investor participation in the property market would ultimately lead to a lower supply of new homes to the property market, higher rents and then a blowback to higher prices. “It will do nothing to fix the basic problem which is a chronic undersupply of housing relative to population-driven demand.” That much he got right. Proptrack’s executive manager for economic research, Cameron Kusher, said the removal of negative gearing and increasing capital gains tax might marginally reduce house prices, but consequent discouragement to investment would reduce supply. He said” “It’s important to look at the taxation system holistically rather than in a vacuum, especially whilst the rental market remains challenged.” In other words, there would be more disadvantages than advantages. Barrenjoey’s chief economist Jo Masters warned of the “unintended consequences” of modifying the current settings. She said: “Negative gearing and capital gains tax reform alone are not a silver bullet and need to be debated both in the context of broad tax reform, and the other levers available to the housing sector, including supply.” Nicola Powell, Domain’s chief of research and economics, said that it was “a common misconception” that the negative gearing and CGT provisions were “primarily enjoyed” by wealthy, older Australians.  Powell said most investors own just one property, and a larger share of them are under 50. She said: “If negative gearing were removed or scaled back, younger, more financially vulnerable investors – especially those with just a single property – would be the first to feel the impact, potentially leading them to sell. Meanwhile, wealthier investors, who are more likely to be positively geared, have greater financial flexibility and would be less affected.” Like other respondents, Jarden analyst Lou Pirenc says any benefit from the departure of some investors from the market it would come at a cost. He said: “Longer term, growth to new housing supply could be further weakened with less incentives for investors to enter the market, especially as the cost of owning an investment property currently remains unattractive. “This,” he said, “could potentially see house prices RISE longer term as the imbalance between demand and supply exacerbates.” Indeed. So the consensus among those commentators is that removing negative gearing tax benefits and increasing capital gains tax would not provide any long-term improvement in housing affordability but would reduce the supply of housing, particularly rental homes, and PUT FURTHER UPWARD PRESSURE ON RENTS. But try telling that to the Greens, whose draconian anti-real estate policies were a primary reason they were the big losers in the Queensland state election at the weekend.

Politicians and journalists love to scapegoat and demonise, particularly with issues impacting housing markets – with property investors always a popular target. Australia’s love of scapegoating is one of the reasons the nation seldom resolves any of the key issues it faces. Politicians hold press conferences, they stage inquiries, they bring on royal commissions, they make announcements – but the recurring theme is looking for someone to blame and to vilify – preferably someone other than themselves. In real estate, investors and related issues like negative gearing are blamed for all the problems afflicting the housing industry – including poor affordability and rising rents. But, according to analysis by the Reserve Bank, property investors have copped the brunt of rising interest rates and haven’t passed on their impact to tenants in the form of higher rents – or, not much. New Reserve Bank research debunks the idea that so-called greedy landlords simply pass on higher mortgage costs to their tenants via rent increases. According to the RBA analysis, after analysing years of investor tax returns, for every $1 increase in home loan interest repayments, property investors have raised rents by just 1¢. The RBA economists who wrote the report said: “To put this effect in context, the median monthly interest payment for leveraged investors increased by around $850 between April 2022 and January 2024. “Our estimate suggests that this $850 increase in interest costs would have raised rents by less than $10 per month, or just over $2 per week.” The research, released in the RBA’s quarterly bulletin, is an attempt by the central bank to refute the commonly held perception that landlords pass simply higher interest rates on to renters.  While there is a public perception that rents and interest rates tend to move in tandem, the RBA says this is more a case of correlation rather than causation. The RBA says: “Pinning down the relationship between interest rates and rents is tricky because both will tend to move together with the economic cycle. “For example, a strong economy, with a pick-up in income growth, will see increased demand for rental properties. This will put upward pressure on rents. At the same time, interest rates may be raised to reduce inflationary pressures.” So they’re saying that rising rents and rising interest rates tend to occur at the same time, rather than one causing the other. The sample period for this research includes two other interest rate tightening cycles, including immediately before and after the global financial crisis. RBA governor Michele Bullock said in August the fundamental reason rents were increasing so quickly was because there was not enough housing supply to meet demand. Bullock told a parliamentary hearing: “Landlords can only pass on interest rate rises into rents if there is demand for those properties. If there isn’t, then it’s very difficult for them to pass those costs on.” The researchers said that housing demand had been strong due to high population growth and an increase in the number of households with spare rooms.  Meanwhile, supply had been hampered by rising construction costs, which the RBA says have increased 40 per cent over the past four years – although other estimates say they have risen more than 50% in the past three years. You could argue that the RBA has a vested interest in the argument they are presenting, because many believe that higher interest rates have driven increases in rents over the last few years - and therefore Bullock and the other financial elites on the RBA board are to blame for the rise and rise of residential rentals. What do I think? I don’t think much of the RBA and its arrogant out-of-touch behaviour which sees only economic graphs, charts and numbers – and displays no feeling for the impact of their ivory tower decisions on ordinary Australians, without achieving the end goal of actually taming inflation. But, I think they’re correct in this instance. Higher interest rates have not caused higher rents. It doesn’t matter how high interest rates go, or any of the other rising costs of property ownership – investors can increase rents ONLY if there’s high demand and low supply. It’s historically low vacancies that have caused rents to rise and rise – not high interest rates.

How long could we reasonably expect governments to take, to sort out a problem like the rental shortage? I ask the question because we have had the problem of a shortage of options for tenants in Australia – and the consequent steep rises in rents - for a very long time. And it keeps getting worse, not better. The latest data from SQM Research shows that, nationally, the vacancy rate got a little worse last month, dropping from 1.3% in August to 1.2% in September.  Three of our capital cities have vacancies well below 1%. And in six of the eight capital cities, vacancies stayed the same or got smaller in September. In only two cities was there a slight improvement.  But the key piece of information is the longevity of this rental shortage crisis.  Australia has had vacancies below 1.5% for close to three years now. It’s generally considered that a balanced rental market – one in which there is ample supply of homes for tenants to choose from and rents are stable – is one where vacancies are at least 3%. The data from SQM Research shows that Australia has not had a vacancy rate as high as 3% at any time in the past 20 years. The closest we came was 2.9% in April 2020 after the onset of Covid caused major disruption to property markets.  Since then, the national vacancy rate has dropped sharply, reaching 1.2% in March 2022 – and it has hovered between 1% and 1.3% for the past two and a half years. According to SQM Research, a further 1,700 rental properties disappeared from Australia’s rental market in September – at a time when the nation’s population has surpassed 27 million. The SQM report said: “The total number of rental vacancies now stands at 37,932 residential properties, a decrease from 39,665 in August.”  There are clear reasons why we have had this steady decline in the number of properties available for rental, a shortage which has caused rents to rise and rise. Mostly, those reasons relate to the decisions of politicians, particularly state politicians, in making life increasingly onerous for the investors who provide over 90% of the homes that people rent in Australia. State and territory governments have increased taxes on investors and have changed the rental laws in ways that have eroded the rights of the owners. This has led to a reduction in the number of homes available for rental. In Victoria, the state with the most onerous conditions for investors including big tax increases, the number of rental properties in the state has fallen by 22,000 so far this year, as the investor exodus gathered momentum on the back of anti-landlord legislation. That’s according to new data from the Department of Families, Fairness and Housing. And its data supports a trend identified in the latest Investor Sentiment Survey published by PIPA – the Property Investment Professionals of Australia (PIPA). The survey described a "sell-off of investment properties around the nation" that has "continuing unabated" and "fuelling fears of an even tighter rental market". But the problem is most acute in Victoria. PIPA Victoria board director Cate Bakos says legislative changes and increased taxes are driving investors from the state. A new land tax regime, minimum rental property standards legislation, and policies that are seen as overly tenant-friendly have caused many investors to sell up in Victoria. Nicola McDougall, the Chair of PIPA says: “This is predominantly due to its plethora of anti-investor rental reforms, as well its new land tax regime that is set to cost investors billions of dollars over the years ahead.” PIPA’s annual investor sentiment survey found Victoria was regarded as the “least accommodating” state or territory for property investors in the nation, with 22% of survey respondents indicating they had sold at least one dwelling in Melbourne in the last year. As a consequence, rental availability has fallen and rents have risen. Data from Domain shows that the vast majority of Melbourne suburbs recorded rent rises this year, continuing a trend that has extended over several years. According to the Domain rent report for the September quarter, the median house rent in Melbourne at the start of 2022 was $440 a week. Now it’s $580 a week. The median unit rent was $375 a week in January 2022 and now it’s $550 a week. That’s an increase of almost 50% in less than three years. But the problems keep getting worse, with NSW being the latest state government to pass new laws detrimental to landlords. REINSW CEO Tim McKibbin says the lessons for the NSW Government are crystal clear but have been disregarded. He says: “The removal of landlords’ rights under the guise of populist rental reforms has had a clear negative impact on renters elsewhere. “The rental reforms by the NSW Government will result in more investors selling up or opting for a short-term accommodation strategy, both of which remove more properties from the private rental market. “This is already happening and it’s happening at a time when the NSW population is increasing by over 15,000 people each month. The rental market is in crisis and we need solutions, not reforms that we know from recent experience will make the problem worse.” And that pretty much sums up the seriousness and absurdity of this ongoing issue. Australia has had a rental shortage crisis for several years but the only policies implemented by state governments have made a bad situation even worse.

There is one thing that Australian politicians are really good at – possibly the only thing - and that is diverting attention from the real issues and scapegoating others for the problems that they, the politicians, have caused. Right now, the core issues impacting Australian households include the housing shortage, the high cost of creating desperately needed new homes, the chronic rental shortage and the reality that rents keep on rising. It’s noteworthy that the recent AGM of the Commonwealth Bank reported that they have had to provide emergency payment arrangements to 132,000 customers who are struggling to pay their mortgage amid a cost of living crisis and very high interest rates. We also have saturation media coverage of the plight of tenants paying higher and higher rents amid a chronic shortage. So, what are politicians and journalists obsessing over? The issue of negative gearing. Now, what relevance does negative gearing have to the issue of the housing shortages and the high cost of building new homes and the chronic shortage of rental properties? The answer is: None. It has no relevance whatsoever. Scrapping negative gearing won’t fix any of these problems – but it will make some of them noticeably worse. Recently columnist James Kirby wrote about this in The Australian. He wrote: “Experts are warning the government’s review of property tax concessions could make housing affordability worse, with New Zealand’s recent failed attempts to do something similar cited as an example of what could go wrong. “After the NZ government cut tax incentives for property investors three years ago, the volume of investment funds entering the residential market halved. And as the supply of rental property evaporated, rental prices soared.” Kirby wrote: “The attempt to change New Zealand’s version of negative gearing – and its capital gains tax regime – were widely seen to have backfired and a new government has since progressively reversed the original changes.” However, Kirby points out, the Treasury in Canberra is now assessing the same tax territory with a review of negative gearing (where property investors can declare losses against tax) and Capital Gain Tax. Kirby says: “While Anthony Albanese has distanced himself from the review – insisting it is an internal move by Treasury – tax changes around property investment are highly sensitive, especially as the ALP’s Shorten-era election loss was significantly due to unpopular plans to restrict investor tax incentives.” Ray White group chief economist Nerida Conisbee says: “The current tax incentives ensure we have enough rental housing, if you cut those incentives you only have to look at New Zealand to see what may happen – New Zealand is now the least affordable rental market in the world.’’ Kirby wrote: “Put simply, making property investment less attractive will drive investors out of the market. The only question is the degree to which they will flee and that in turn depends on conditions at the time. In New Zealand the reform measures were imposed as prices were falling and interest rates were rising – exacerbating the blowback from investors who cut their funds in the NZ market from $21bn in 2021 to just $11.8bn in 2024.” Kirby also referred to the fact that Paul Keating as Australian Federal Treasurer scrapped negative gearing in 1985 and then, two years later, reversed his decision and reinstated it in 1987. And that was because the end to negative gearing benefits caused a shortage of housing across Australia and rents rose sharply. It’s time for Australian politicians and journalists to stop obsessing over side issues like negative gearing and focus on the core issues in the housing industry – which is the shortage of dwellings, the high cost of fixing that shortage and in particular the chronic under-supply of rental properties.