Hello, Welcome to the Australians Money Puzzle podcast. I'm James Kirkby. Welcome aboard everybody. What a difference a week makes. We finally get a raid cut and suddenly there are stories ever heard really about improved signals across the property market. I've been wondering where exactly these improved signals are, Like, where are the hotspots in this national property market post rad cut? Where we are it would seem heading into
a raid cycle. Well who better to tell us about where the hotspots are than Terry Rider, regular guest on the show, and who runs the hot spotting service? How are you, Terry?
Are you well joined yourself? Good?
Thank you, thanks for coming on the show. Do you get that sense that there's an uptick in tempo in the markets following this raid cut? First in four years?
Look, I really don't think that the very small and apparently isolated rope.
Cup is terribly influential.
I think things were fairly upbeat already. It certainly doesn't hurt and as may have a psychological impact. It does improve borrowing capacity a little bit. But we ended twenty twenty four with markets generally pretty strong, and we started twenty twenty five very strongly as well. We often find in our business, and I think a lot of properly related businesses that January is often half a month because a lot of people are on leave and not really
doing things. But this year January started right from the get go. A lot of investors obviously started the year with intent, intending to do things, and that's what was happening last month and through into February. And a rope cut is perhaps a minor contribution to something some momentum that was already building.
Think okay, but Sydney and Melbourne places on the month were actually negative.
Well, that's right.
We never have a situation in asurround property markets where the same thing that's happening everywhere. Sometimes media talk talks about a two speed market. We tend to think of a more like a four speed market where we at any point in time in twenty twenty four was a case in point. We had some markets, some capitalist cities and some regional markets that were booming, some that had moderate growth, some that were stagnating, and a few like Melbourne,
with prices actually fell in the last twelve months. And that's pretty much normal. We do believe very strongly that real estate is local, very local. We don't have an Australian property market with literally thousands of individual markets and they all arise out. What's happening with local economies and Melbourne I think we'll talk about it a little bit later, but it's a market that's struggling for its own local Victorian state reasons.
That's right, Yes, it is.
Well.
I imagine when people meet you and they find out what you do on the nicture of the enterprise hot spotting, the obvious question for you, Terry is what are the hotspots from a geographic perspective around Australia to the morment, where are the hot spots?
Well, taking a broad brush view, we have done a major analysis to give us some indicators of where we expect the growth to be in twenty twenty five and beyond, because we always take a long term view, as you should with real estate, but all the metrics tell us that is going to be very much the year of Queensland. Queensland not only investor but also home buyers because Queensland gets more uplift from internal migrants than any other state
or territory in the country, and that continues. So we have a strong demand from people moving to Queensland as home buyers, but we also have investors. There seems to be a pivoting away from Perth and worstern Australia towards Queensland. Regional Queensland is very strong. We ended twenty twenty four with some of those Queensland regional cities as hot and his frenzied and as competitive as the Perth market has
been in the last year or so. So if you're trying to buy a regional city like Rockhampton or Townsville, you'd find yourself competing for the same property with fifteen or twenty others and it would sell very quickly and probably for more than the asking price. So we're going to see more of that this year right throughout regional Queensland because it has probably more than any other state or territory.
It has a.
Large number of regional centers that are affordable, they have high rental yields and they've.
Got great prospects for growth. There's a big.
Infrastructure spend happening in many of those cities, and Queensland offers that more than any other place in Australia. Adelaide in South Australia continue to be strong. Adelaide's remarkably consistent. It's been rising for four or five years and it's not showing any signs of slowing down, whereas the Perth and Western Australian markets definitely are weren't seeing no signs
yet that Adelaide has slowed down. There's still a significant shortage of listenings and Adelaide's still a significant shortage of rent. Rental vacancy is an incredibly low in Adelaide, as they have been for the past several years. Probably the big surprise that I think we'll see in twenty twenty five is Darwin. I think Darwin's going to do much better. It's been a poor performer in the last couple of years.
More and more investors asking questions about Darlin because it has by far the highest rental yields in the country amongst the capital cities. It's very affordable, and it also has some major investment developments, infrastructure projects and the works, some very big resources related things happening in the Northern Territory. If one or two of those come off, it's really going to supercharge the Darwin market.
The ones that expect to be weak.
Camera continues to be one of the weakest markets in the country, and Perth and Wa after two or three years of leading the nation on price growth, there's a lot of indicators now that those markets moderating and the peak has been passed in those markets unrapidly.
It's told it there and we'll do with Sydney and Murdurn in the Mormons. Two things cut cut my eye there on on Perth topping ours, you were seeing, there's a number of indicators would suggest that this extremely good spell they've had in Perth where it was the strongest city in Donetian, what do you see that tells you it might be slowing down?
Now?
There are a number of indicators. Firstly sales volumes, which is something that we monitor quarter by quarter, and it's about the middle of twenty twenty four we started to see those taper off because prior to that, for the previous a two years, pretty much every suburban Perth if you looked at the quarterly the pattern of quarterly sales activity, it was just rising and rising, and then it started to taper off in the second half of calendar twenty
twenty four, so it's indicator, but more particularly perhaps we've also seen the rate of price growth dropping month by month. The latest figures from Project for example, the annual rate for Perth has dropped to about twelve or thirteen percent, whereas just you know, four or six months ago it was not twenty five percent. And we've noticed that every
month the rate of growth has dropped. Perhaps the most connect significant thing with the price data was with core Logic where they show the figures for the latest month and the latest quarter, and Perth has been overtaken. Has previously been leading the nation by quite a considerable margin on those metrics, but in the latest figures for January, in the latest months several cities have overtaken Perth on leading for the monthly price grape but also for the latest quarter.
So we saw.
Cities like Brisbane, Adelaide and Darwin and some of the regional markets actually having high growth in the latest month and the last latest quarter.
I see, okay right with that. Yeah, so that would suggest it has been on the show a few times. Interesting to hear you actually drill down and chill us why that is the case that the Perth market stopping from a great height. It has to be said by that, I mean that the price growth was extraordinary for a year or two, but now slowing down. And then on the other hand, Terry, you were saying that you were saying that Queensland actually gets a great left from immigration.
It's interesting. I would have thought it was Melbourne being sort of jobs city that had that, but you find that the immigration is a pump if you like, behind the Queensland market. Yeah.
Well I was talking when I referred to queens I was talking about internal migration, which is people moving from part of the Australia to another.
And we've had this.
Trend for some time awfter a well in course of Sydney for ten years, where people are moving from the two biggest cities to regional areas of smaller cities. We call it the exodus to affordable lifestyle. And it was believed by some that it was kind of came out of the cop lockdowns, but really it was underway for much longer, and it hasn't slowed down now that all the sort of the lockdown and restrictions of COVID have passed,
as some expect that it would. Now there was a prediction that people would move back, but that's not happening, nor would I expect it to so Queensland. Whereas Melbourne gets the most from overseas migration, Queensland, Brisbane and Queensland get the most from internal migration and really big numbers. You know, it's about climate and or perception of climate because it hasn't been so great up here in Queensland,
but lifestyle climate affordability too. As I said earlier, there's so many regional parts of Queensland that are just so affordable relative to the lifestyle that they offer, both along the coast and some of the wonderful inland cities like twimber Is a wonderful place, was great lifestyle aspects, very strong economy and it's one of one of the strongest regional markets in the nation.
So these regional spots hot spots in Queensland. You mentioned some towns Rockhampton, Townsville to Woomba, so it seems to me that they have a lot of what investors want in that it's not just that the yields are better than inner Sydney or inner Melbourne, but they have the price growth for atension as well, so you're getting the two sides that you would always want as an investor. Yes, very interesting and I wonder how they match up against the big cities. We'll take a break, folks and we'll
have a look at Melbourne and Sydney in a minute. Hello, Welcome back to The Australian's Money Puzzle podcast. James Kerby here with Terry Ryder of the Hot Spoting Group. So Sydney and Melbourne, then, Terry, Melbourne obviously the weakest market in the country, the weakest figures on just about every criteria. Falling prices in the last month the two and Sydney
also had a soft on in January. As you said, that's it's not a regular a month, but they would have very low yields and would those years would stay. I mean roughly, what would there be like half of regional towns something like two and a half percent against five something like that.
Well, yeah, perhaps an even greater differential. There's there's plenty of places in regional markets across trade we can get six seven percent rental yields. And we should never forget when we're talking about yields, we must never forget to include units and the discussion because increasingly investors and home buyers are opting for attached dwellings as a purchase of choice, and of course the units tend to.
Have higher rental yields.
But yeah, I mean, you can't very readily find well above six percent rental yields on houses in regional queens somewhereas in Sydney and Melbourne.
It's more like two or three percent.
Yes, it is, And our listeners will tell you this is the fact. There's a correspondence coming up, folks. In one of our one of our correspondents, John actually spens out just what is when he's finished paying all the taxes and bits of Victoria, and it's really spectacular. Well, it's one point two percent a year, he says. We've come to that in the moment. So looking at Melbourne and Sydney, then what's the view on them? The leading research houses are seeing two or three percent growth this
year from Melbourne or Sydney. That's barely keeping up with in fleetion and that's sort of like basically going nowhere, what's your view on the big cities?
Look a little bit more abortion that when we when analyzed all the markets around the country, and as I said, earlier we found Brisbane and Queensland leading Adelaide in South Australia, and well Sydney and Melbourne was sort of the middle of the pack. Expected to have moderate growth this year, certainly, but perhaps a little bit better than two or three percent.
The thing I think people need to keep in mind is that those figures that are published about Sydney house prices rose two percent last year, but they're very big generalizations. People again come back to the point that markets are very local and nature, and that includes within big city. So Sydney is a massive city with something like over seven hundred suburbs and it's not just one market all
performing in the same way. So whereas the generalized figures would say that Melbourne house prices only rows two or three percent last year, within Greater Sydney, there were pockets that did double digit growth, particularly for example, the local governor of Canterbury Bankstown, which has become a very popular market because it's quite low, well located, got good amenities and infrastructure, but by Sydney standards, quite affordable. Particularly it's
unit markets. You can sort of buy small units in many of the suburbs of Canoby Bankstown. You know, in the four hundred thousands, which is a very rare thing to be able to do anywhere in Greater Sydney.
Did you say that what did you say the price growth was in the Canterbury Bankstown Well.
In many of the suburbs of Canterbury Bankstown Municipality it's ten or fifty percent in the last twelve months.
That right, but the city was just two or three Say, sorry to interrupt you, and you were going to tell me about the houses, you said, the units and what was the story with the houses there.
Well, you're typically paying a little bit over a million dollars for houses, but again, you know, the medium price for Sydney, depending on who you figures, you believes one point two one point three million as a median house price, and Canery Banks Down houses tend to be lower than that. So it has that appeal of affordability, but also you know, pretty good location, bustling market. It's one that we've been recommending for the last couple of years and it certainly
performed well above the average for Greater Sydney. So I think the trick for investors and buyers have all sorts really is to find those outlies and they do exist within Sydney. They also exists within Melbourne because there are some parts of Melbourne where her prices have actually grown in the last twelve months, contrary to that generalized figure it says overall Melbourne was down a few percent.
In Melbourne, then there's no direct equivalent.
We'll find that the more affordable outering areas that are once where it's most likely to have been price grape, but also in the inner city markets, it's the unit markets. And this I think we've talked about this before, James, this big trend where more and more people are opting for attached dwellings, not just for affordability reasons, but for lifestyle, for location, for security and safety, because a lot of people are concerned about crime on the streets now Melbourne.
I know a lot of people in Melbourne. I'm constantly hearing stories about breakings, who attempted breakings, and people feel some people anyway want to be in an apartment on the tenth floor and a building.
That's got security features.
So there's lots of reasons why people are opting for units these days, and we're now seeing ten around that dominant paradigm that used to be which said that houses on their noise show better capital growth than units, but we're seeing that completely challenged now right across Australia in different markets where I think figures from I think core Logic recently said that across Australia, sixty percent of suburbs have higher growth for units than they did for houses
last year, and in Brisbane it was eighty seven percent of suburbs units outperformed houses.
Do you think there's an element of catch up there because the units were way behind.
There is an element of catch up, but I think, James, it's mostly that we're just seeing this real uplift and demand. We've been watching the market share of units in the major cities and it's rising quarter by quarter and Sydney is now fifty five percent of all sales across Greater Sydney attached dwellings rather than houses on land, and so
that's having a big impact on the price data. And just getting back to Melbourne, some of those inner city Melbourne, including the Melbourne CB itself which has a lot of apartments, there was price growth in some of those locations with units in the last twelve months, contrary to the overall trend for Melbourne.
Is that interesting? Yeah, very interesting because when we look at units, often you will see that they have been sold for something like the price that there were four or five years ago. I'm talking about it at Melbourne for instance, But then that doesn't tell me that they look more closely, maybe the case that the last twelve months was where the action was and actually that it has recovered in the last felve months. And when you say units cherry, you basically mean anything other than a
stand alone house. But the sounds of it, it covers both apartments and the townhouses.
Anything attached townhouses, units, apartments, whatever you like to call them, things that they're on some sort of strata plan. And it's I think it's probably the most significant trend in Australia safe for the last ten years. We're quite interested in it and we're tracking it and we're starting to you know, we're producing new and different reports now because this has become a big factor in the market. You know, more affordable, lots of features that apartments can offer that
houses can't. Typically a house doesn't have a view, not always of course, whereas much units do. Is that safety and security feature that's that low maintenance, lock up and leave facility that is better with units. And it's also location. Quite often units are much better located. There was actually an interesting study by Infrastructure.
Victoria a year or two ago.
Which found that the average apartment was much better located relative to where schools and shops and public transport was than the average house and that has an impact on price grast, so that all those factors are feeding into this trend and it's become Yeah, we think the most significant big change in property markets in Australia in a decade.
See that's really interesting because I suppose the challenge what a challenge is the bias probably that many investors would have in two dan I probably have from watching units perform poorly against standard doornhouses, probably for a decade at least. Yeah, right, okay, but do you think the swing is happening?
Well, I think it was.
Already well underway. And if you look at many locations in Australia compare the price growth not just in the last year, but in say that the last five years the four year average, we're finally increasing examples where apartments are up performing the houses in the same Like Christian as I mentioned, earlier. Therese recent figures that across the Strike sixty percent of suburbs now units are upperforming, and in Brisbane it's a much harder percentage.
Very interesting, Okay, listeners, I think that we would take that on board in terms of mega trends, which we don't really see very often, and it's one of the reasons I asked Harry to come on the show was to try and eak out of your life what's really happening on momentum and trends across the country, not just in terms of this town or that town against another suburb, but very interesting that notion that in fact, the units are going through a very strong phase at the moment,
and it's something that's worth keeping in mind. Just when you think you figured out the property market, it surprises you. And there was a sense always, of course that units would need to catch up with standalone homes because standalone homes greatly outperformed during COVID, So the two things are probably coming together now. But take short break. I have some really good questions, including this first one from John back in the moment. Hello, welcome back to The Australian's
Money Puzzlive podcast. Terry Ryder of the Hot Spotting Group is my guest today and we are talking about, interestingly, I think the power of unit investing, which has been much derided, if you like, in recent times. But Terry's got some pretty convincing information that the units are hot at the moment. Is also you know, I think very perspeactively argue that Queensland from original basis, Queensland is where it's happening, where it's going to happen, and I certainly
would have no argument with that. I think all the scigens do suggest that. Okay, a couple of questions. John says, I thought you tined this interesting. I recently re reviewed my property in Victoria, which was the worst by a long way of the properties he has. He says, we're charged three towns two hundred and forty nine per month in rent for a free standing house and Point Cook. Okay, so that's the income, and it's a house free standing in Point Cook, which is an outer suburb of Melbourne,
relatively new suburbs. And then he lists it's really something else. He lists the set costs, the land tax, the council tax, the body corporate at the water rates, and the management fees, the insurance fees, the Victorian government mandates that smoke detective fee, and it all comes to thirteen thousand a year, one
thousand and thirty per month. And he says, I earn, after fees and taxes, one thousand a month, or a return of one point two percent per annum on a house that's supposed to be worth over a million dollars. I raised this with the agents and they laughed and said they hear it all the time from many property owners. There you are one point two percent. Maybe that's the
more we know. The yields are really low in the big cities Melbourne and Sydney because the are so high and you pay so much for the property, and your rent is such a tiny fraction after the amount you've paid that the years. I am not surprised that there are between more than three percent in effect. And when you talked about years, Terry, were you talking next years or grossians?
I definitely gross yields.
Yeah, yeah.
And of course the reality is that with not only interest rates so high, and this recent small cut doesn't really help a great deal. After a dozen upward movements and interest rates over the last couple of years, but not just interest rates. There's been a massive increase in all the costs of owning property as investors, council rates, insurances,
maintenance costs have increased a lot. I almost fell off my chair when the Federal Treasurer suggested in the past week that investor owners were be in a position to pass on the latest interest rate cut and to tenants in the form of a rental reduction. I thought, well, I'll obviously there's an election in the wind. He's trying to carry favor with a certain section of the market.
But seriously, after all those rises and interest rates, after the massive increases and all the costs, to suggest that the average mom and dad investor is just an ordinary family on an average income, can afford to hand out a rental cut because there's been that one tiny, isolated reduction in interest rights.
It's just fascical.
He might have had his tongue very firmly in his cheek when he said it.
Well, a political imperative there rather than an economic one, I imagine. Okay, Kate says, it's funny you've just asked this. Kate says, the redcot is only no point two five percent and compensations are saying that might be the end of the cycle. Pardon me for being very skeptical about this, but I can't see how it'll change the numbers that really mattered the most. Well, Kate, that's exactly what Terry was saying there that look, it's not so much. I think Terry that it was a cut and that it
was no point twenty five. It was the change of direction. I think that's what people. I hope it's the really good news that the reds field start coming down. We will believe that when we see it. Okay, Bill says, I like the podcast. He says, I love the podcast, but as a grumpy lawyer, I have to remind James that the mortgagee is the lender, not the borrower. Keep up the good work. Aside from those minor clittures. Yes, sorry, billknew, I know.
I knew.
In a minute I said that I knew I'd got them the wrong way around.
We won't do that again.
Okay, Billy says, I want to share about your discussion on the fourth of February with Kitty Parker about the extent to which Mom and Dad bank of Mom and Dad formalized loan agree documents would actually every bother pursuing their children for loan arreers. So everybody might remember that we had a very interesting session about the Bank of
Mom and Dad. It was really interesting as Richard Shellback actually came in first of all with some really hard numbers survey that they had done at ubs, and then Kitty Parker, buyer's advocate in Sydney, came in and talked about coming upon this issue of the bank of Mom and Dad. Specifically in property. It's always going to be where parents come to an arrangement that they actually loan money to their adult children and they adult children then
go and buy a home. And I was skeptical about not so much about the agreements about the way they might ever be enforced. So Billy says, he explained that they did all this, that they drew up alone and they had all parties sign it for the loan that was given to one of his adult children. He says, the reason we did it was from the point of view of acid protection against the remote possibility that the
marriage can to end up in the divorce courts. Fair enough, that's putting it on the table, That's what it's all about really, isn't it Most of the time when people do these effectively what you can call pre nups on property acquisition, where the parents bankroll one of their adult children.
That adult child is probably in a couple, they have a loan agreement, and really, behind the scenes, the logic of the loan agreement is that half the property or equal, they won't walk away should their adult child be divorced from their partner. Now, Billy concludes, I don't know if our loan agreement would have held up in court. We never needed it. Our daughter's marriage remains solid, free of the burden of morgad stress. Our money was paid back to us over the course of a few years, and we.
Were happy to play our part.
Okay, terrific, Billy, thank you for that. Interesting. What do you think, Terry about this bank of mom and dad loan agreements. I'm sure we know what happens all the time. I mean, we know the figures now, and we know that they can their parents put up to two hundred thousand pert time where they help adult children buy whether if there's a loan agreement formalized between the parent and
the adult child blame property. Do you think it would ever really work legally or is it just a terrent like I think Billy had it there.
Honestly, James, I've never actually thought about it in those terms. I guess I always made the assumption that you know, it's all within the family, and you know, this kind of thing in ninety nine percent of cases would never
be needed because it's a family situation. It's kind I kind of like it because it's like I think, it's always a shame that your parents have to die before you get to your inheritance, and this is a way where an inheritance can happen while your parents are alive and kicking and you can all enjoy the situation together. It's just one of the realities of the modern world and the modern real estate situation in Australia that real estate is so expensive, and there are lots of reasons
for that. I certainly lay the blame for most of the problems at the feet of politicians who have exacerbated the poor affordability in Australia, in particular the incredibly high cost of building new dwellings. I just want to throw some figures. There's a little bit of the off topic,
but it's relevant to the overall discussion. And the last week we've had two figures out, one from the Bureau Statistics, so we said that the average cost of building a new house in austral is now five hundred and thirty seven thousand dollars. And then we had from the HIA core Logic Residential Land Report the medium lot price in our cities is now four hundred and eight thousand. So you had those two figures together, we're getting scarily close to the point where it costs a million dollars for
the standard house and land package. This is a very boring brick and tile.
House on it to build anything anywhere, just to build a box thirty cares out from the city, Yeah, coming off two a million dollars very interesting.
Yeah, And so I mean, and those figures are really alarming. And the Productivity Commission has just published a report which spreads the blame across a number of features, but by far the biggest one, according to the Commission's report, is regulation and red tape. State comment's tinkering with the design of houses and ways it adds to the cost of
construction delays. You know, the building industry is now half as productive as it was in the nineteen nineties, is taking twice as long to build houses because of regulation and red tape. So all of that feeds into the fact that it's very hard for young people to get into housing without the help of the bank of mum and dad. And not every family is do we have the situation where the parents can actually afford to loan or give money to their adult children to buy a house,
but some do. Obviously it's become increasingly a large factor. But the reality is that for many young people, without their assistance from family members, they can't get into the market.
Yeah, yeah, very true. And I suppose that just to cover off on Billy and the whole scene. As you see, not everyone can afford it, but maybe some people can. And perhaps the most upbeat way of looking at it is, as you said, Terry, you know, people are getting their inheritance should they ever get an inheritance, but those who do are getting them in their sixties. That's you need the money in your thirties and forties, when you're buying
a house, that's when you really need it. And I think if it can be done, it's certainly worth exploring, and if it needs to be done in a formalized manner, as Billy outlined there, Well, then if it works that way for everybody, or the better if everybody comes to the table in the right spirit. Okay, very interesting, Thank you very much, Terry Ryder from Hotspoting. Great to have you on the JAMS.
I always love coming on talking to you, and I love talking about real estate, as you may have noticed, such an important topic and so very much top of mind for so many Australian individuals and families right at this time.
It is always is and investors too. Okay, folks, keep those emails coming the Money Puzzle at the Australian dot com dot Au. Today's show was produced by Leah Samulu
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