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Tighter supply to create investment opportunities in regional cities

By Simon Pressley

Promoted by Propertyology

Many of Australia’s regional cities have supply-demand ratios which are currently more favourable for property investors than the big profile capital cities.

A couple of years ago, from ongoing analysis of the construction industry’s intentions, Propertyology formed the view that there was a period of suppressed price growth ahead for most major cities. Consequently, we turned our focus to a few lesser known locations with better potential for investors.

A more controlled housing supply pipeline and very affordable property are partly why our buyer’s agents have been actively investing in several regional cities for a while now.

One of the biggest misconceptions about the recent property boom is that there’s a severe housing shortage. The evidence says that population growth over the last few years is consistent with historical trends while residential construction has been at record levels.

Propertyology’s analysis of official residential dwelling construction and population data over two separate three-year periods suggests that Australia’s biggest cities are approaching a tipping point.

Over the past three calendar years, 676,067 new residential dwellings were approved compared to 461,383 for the three years ending 2008. Australia’s population growth over each of those three-year blocks was 1.063 million and 1.164 million, respectively.

In other words, Australia’s population growth was about 100,000 less however, we approved 200,000 more dwellings.

Strong house price growth in Sydney and Melbourne over the last four years was due to a number of factors, but a lack of supply was not one of them. While vested interest groups and some segments of the community will be quick to disagree with me, the evidence does not support their statements.

For instance, comparing new supply and population growth of 2016 to 2008 when Sydney’s median house price only increased by 0.6 per cent, population growth was the same but more than twice as many new dwellings were supplied in 2016.

Sydney and Melbourne’s stronger economy - and consumer sentiment which comes with it – at a time of record low interest rates – has created increased buyer activity to levels over and above the underlying demand of population growth. The record high volumes of housing supply will flow through to much lower rates of price growth as confidence wanes from housing affordability concerns and tighter credit policy.

We only need to look at cities like Brisbane, Adelaide and PerthPerth, TAS Perth, WA to see what can happen when consumer sentiment isn’t as strong while supply levels are high.

If there was a such a dire shortage of housing, rents would be increasing significantly every time a lease expired however, the evidence suggests nominal movement in rents for five years.


Since 2013, there has been a distinct trend in Australia's bigger cities for apartment construction. Ten years ago, 3 out of 10 properties approved in Australia were apartments, whereas today it is 1 out of 2.

During the 2016 calendar year, 80 per cent of new dwellings approved in Canberra were apartments – it was 70 per cent in Sydney, 58 per cent in Brisbane, and 54 per cent in Melbourne.

It was only 13 per cent in Hobart where housing supply volumes maintained its status quo over the past few years while factors on the demand side of the equation have improved.

Out of all of the capital cities, the official data suggests that Hobart will have the tightest level of supply over the next few years. For capital growth and rental yield, Hobart was Australia’s best performed capital city for the year ending June 2017 and Propertyology’s research suggests it’s likely to hold this mantle for a while yet.

There are several regional cities across the country where the housing supply pipeline is significantly tighter than most capital cities. With very affordable entry prices and strong yields, the annual holding costs are negligible. Taking advantage of such opportunities has meant that some of our investors have been able to comfortably afford to buy 2, 3 or even 4 investment properties.

‘Big city’ is far from a magic formula for ‘best investment’. To the contrary, 78 per cent of Australia’s record building approval volumes in the last three years were concentrated in our capital cities – home to 65 per cent of our population.

 

Propertyology is a national property market researcher and buyer’s agency who buys properties exclusively for investors in strategically-chosen locations all over Australia. The multi-award-winning firm’s success includes being a finalist in the 2017 Telstra Business Awards and 2016 winner of Small Residential Agency of the Year in REIQ Awards For Excellence. Managing Director Simon Pressley is a REIA Hall Of Fame Inductee and a three-time winner of the REIA and REIQ Buyers Agent of the Year award.

 

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  ["title"]=>
  string(51) "Boost for investors as app sets up off-site bidding"
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  string(55) "boost-for-investors-as-new-app-sets-up-off-site-bidding"
  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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  ["title"]=>
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

Why is Australian property so unaffordable?
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Going global
Australia desirable to foreign investors

AREAS MENTIONED:

Eagleby
Charters Towers
Townsville
Brisbane
Paddington
Sydney
Orange
Melbourne 
Glen Iris
Bondi

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How a move to Hong Kong impacted Julia’s Australian property goals
object(stdClass)#1195 (52) {
  ["id"]=>
  string(5) "18159"
  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
  ["alias"]=>
  string(82) "common-referrer-practice-of-being-paid-on-both-sides-of-the-fence-coming-to-an-end"
  ["introtext"]=>
  string(246) "

The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

" ["fulltext"]=> string(2238) "

Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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