Season 2. Episode 4: Updates on The Australian Property Investment Marketplace (with Matt Ellul)

Join our host Matt Ellul (Managing Director, BuyFair Property Group) as he dives into the ever-changing Australian property investment scene and what is happening currently. 

In this episode, he discusses key topics such as; 

1. The RBA and Interest Rates (providing his bold prediction on where they will head). 
2. Population activity (interstate and overseas migration outcomes) and how it can affect house prices moving forward 
3. Lending conditions for FHBs and Investors 
4. Where to identify opportunities that consumers may not have heard about. 

Explore the latest trends, market shifts, and expert insights in the world of real estate with Matt. Expect candid chats, a pinch of controversy, and valuable information for property investors.

🔗 Listen on Spotify or watch on YouTube.

Learn more about BuyFair Property Group at www.buyfairproperty.com.au and explore their many educational resources at the Education Hub on their website. 

Transcript

Speaker 1 (00:00):

Welcome to the Property Now podcast, where we talk all things property, investment and new homes with your host Matt eol. Speaker 2 (00:09):

Yes, there's bad debt. Yes, there's good debt. The good debt is not bad. It will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand. It's almost impossible. Speaker 1 (00:20):

If you want to learn more about what's happening in the market and how to benefit from property investment, then go no further. We dig deep as to why our sector is a key to building financial security and safety for your family. Never before has it been more important to understand the playing field than now. Speaker 2 (00:39):

And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It's a liability. It's taking money out of your pocket from a cashflow position. Speaker 1 (00:49):

So let's get on with the show. Happy listening and we'll see you on the other side. Speaker 2 (00:54):

Hello, hello and welcome to the Property Now podcast. I am your host Matt Al. It's a pleasure to be here today. Thank you very much for joining us. We are really just talking off the cuff today. I've, most of the episodes that we've done recently have had guests joining me, which have been great and I've really enjoyed having our guests on board, but this podcast episode is just your good old self me, so I hope you enjoy it and I hope you get some value out of it. So the purpose of today is to really just talk about what's happening in the market at the moment. What are we seeing and where are investors feeling most confident to make decisions to invest? There's been a lot of activity. We've had a lot of stats. We've had a lot of numbers come out recently through the different departments that can give us a bit more direction as to what's happening.
(01:53)
So there's quite a bit there to get our heads around. Now, the first thing that I would say is the real key thing that everyone talks about quite often and most people are aware of it in some way or form is what's happening with the Reserve Bank of Australia and what's happening with our reserve rates, our interest rates. Obviously inflation has been quite a considerable challenge within the Australian economy over the last two or three years. It's been much higher than what the government have wanted it to be and it's been causing issues. Cost of living, I'm sure everyone is aware of is pretty severe. Things like lettuces costing $10 and I mean I did chopping last night and two capskin are like $9 or something silly like that and it's putting a lot of pressure on families to be able to, well quite frankly, literally survive. A lot of people are doing it tough, so a lot of people aren't even considering the fact of investing into property or spending money on these things that we probably should be considering so that we can build a little bit more wealth for ourselves. And I empathise with those people. I've been experiencing that as well in a lot of ways. So interest rates are one of those things that we all hear about and talk about and have an opinion about.
(03:24)
And I guess what I'm trying to say is what's happening with them. So at the point of doing this podcast, I think the rates were actually announced as being staying at the same rate, which is 4.35%. I'm filming this in late June, so it should be out hopefully not long after I released the episode 2024. So rates have stayed on hold at 4.35, which has been the case for quite a while now. We've seen something like 12 out of 14 interest rate decisions being increases in has dropped it's come back down to a more reasonable area. However, it did pick up again a little bit in the last couple of months. So I think it's just to sit tight and see sort of approach for the Reserve Bank at the moment. We've got a new governor who's been on board for probably nine months now, so she's probably still finding her feet a little bit perhaps and not wanting to make any drastic decisions.
(04:21)
So my take little old me and who am I to say what's going to happen? I can't predict the future, but my gut feel is that they'll probably leave them on hold for the rest of the year. My opinion was different at the start of the year we actually thought, and I thought that there would almost certainly be interest rate declines, which I think will be a catalyst for another spike in property prices, especially in Victoria. And I'll tell you why in a minute, but my gut fuel now is that there's probably a very good chance that rates will stay steady, especially whilst the numbers are coming back the way that they are for the rest of the year. I think we probably won't see a movement within the interest rate environment until maybe early to mid next year. Do I think interest rates will increase?
(05:08)
I don't, once again, I can't predict the future, but I think it's quite unlikely. I think our community has gone through enough and I think that we need a bit more relief for homeowners and I would say if anything, the interest rate movement is hopefully going to be in a downward manner. So once again, I can't predict the future, but what I do think will happen is that when we do see downward movement, I'm putting that confidence into that now. I think you'll find house prices are going to continue to increase even further, which is probably not great news for first home buyers, which I empathise with. We have a first home buyer business as well, so we do work with first home buyers closely and interest rate going down will be a good thing, but house prices going up will not be a good thing for them, which is why I think it's important whether you're an investor, especially a first time investor or whether you are a first home buyer, it is important to get yourself into the market, get yourself some assets, have something that's going to start working for you and start acquiring some leverage because leverage is really the key hero within owning property in my professional opinion because it's money that you can't make that you are working for.
(06:31)
You can't just transact your time for money and inspect the outcomes that can be delivered you from the outcomes that can be delivered from a leverage standpoint when you own property. Melbourne for example, has averaged 8.1% annual growth over the last 25 years per year, which is around about 20 to $25,000 a year in growth by the way. So that's money that's being made whilst you sleep, and that's why I love property investment so much. The other benefits is that you get other income streams as well, but we're not here to talk about the fundamentals of that right now. So interest rates, I would like to think that we'll see some declines. They'll probably have to watch that closely because I think we'll see a spike in property prices again. So they'll be keeping a close eye on that. Second thing that's really happening at the moment is, and a lot of people would be aware of this, but I'm not sure if they're aware of it, to the point where they understand how much of an impact it's making.
(07:33)
And this is a really big reason as to why I think you'll see house prices spike even further and continuing for a long time to come. And that is predominantly overseas international migration. In the last 12 months, we've had approximately 600,000 people move to Australia. It's been about a million people in the last two or two or three years, and there's no sign of that slowing down. It's looking like that's going to continue on that path for a reasonable amount of time to come. Now the reason why that's so important, and there are a number of reasons why the government is doing that, which I'm happy to speak about in this podcast or in this video. The main reason that they're doing that, in my opinion from what I can see is that firstly, we have one of the fastest ageing populations in the world.
(08:22)
We have a quickly changing environment when it comes to the amount of working Australians and employees that we have paying tax to the government, supporting the overall economy as opposed to how many people we have retiring and how many people we have who are going downwards in what they contribute from a financial standpoint to the economy. To give you an idea, in 1913, we had something like 13 employees to every retiree. If you fast track to 2024, it's something like 2.7 or 2.8 employees or contributors to the economy as opposed to one retiree. So what that does is it puts a lot more pressure on the government to be able to pay things like pensions and support people in their retirement years, which is why we're also seeing superannuation contributions increase. It was 9% a couple of years ago. I think it's at 10 and a half or 11% now, or 10% now, and it's going up to 12%. And that is so that the government can have a bit of peace of mind that people are going to be able to look after themselves a bit more. We like to take our future into our own hands and acquire assets, in particular income producing assets like property.
(09:42)
But the reason why this is happening with so many people moving here is partly because of that. Also inflation is a big thing. During the covid years, migration dropped off a cliff. People weren't allowed to come in, people weren't allowed to leave in majority. So we're trying to catch up on that to a degree, we are a developing economy. We're not as big as a lot of these countries around the world and we're still working our way up, which is why I also think that property prices will still continue to increase for a long time to come. We've got a lot of growth to do. There's a lot more movement in our economy that we should be expecting to see over the next 10, 20, 30, 40, 50 plus years. There's only 26 million of us at the moment, but that is increasing. It's increasing at quite a quick speed.
(10:34)
So population growth is a really big thing. We also have interstate migration, so that's people moving from within Australia. Some might be sick of the Melbourne cold for example, and they choose to move up to Queensland to enjoy some sun. It might be that they move to Perth, which we're seeing a lot of at the moment. And a lot of that's due to what's happening within the economy within those regions too. There's opportunities in those areas. Perth's been a lot of mining opportunities recently and they've diversified their economy quite a lot. There's different things that drive their economy now as well. It's not just mining, it's agriculture, it's tourism, it's wine, it's these kinds of things that are really important to growing states and regions. So we've seen a lot of interstate migration to wa, a lot of interstate migration to Queensland in recent times.
(11:32)
Queensland, for example, actually has a higher median house price in Victoria now, which is insane. However, Victoria has a considerable amount more international migration coming into its region, which is why I was saying before, I think that you can see Melbourne house prices increase quite considerably in the next few years, especially if interest rates do come down like I predicted that they will. So migration's very important. Now we can get to a more granular level with that and we can understand what's happening within different regions. For example, the southeast of Victoria and the Western growth corridors within Victoria are two of the fastest growing regions within Australia from a population standpoint. So when we understand that and when investors understand that, they know that that's a good thing because it's going to put pressure on supply as supply dwindles. There's more people competing for the amount of resource that's available, and that puts pressure on prices upwards When we're in a buyer's market, A buyer's market would be when we've got 10 buyers and a hundred houses for sale.
(12:43)
We're not seeing that at the moment. It's a different environment. So migration very important and I think it's something that you should put more time into understanding if you're interested in property of course, and obviously you're listening to this episode, so I'd say there's a good chance that you are interested in property. So yeah, they're the two big drivers at the moment. Interest rates and then migration. The third thing that's happening at the moment is that there are some changes to the frameworks within things like land tax, national construction codes. If you're looking at building, it's making it a bit more expensive to build, especially in Victoria. And I think that that's probably slowing things down somewhat as well. But all things equal, I think that that will play out and once it levels out, we'll see things increase again quite considerably. So it's interesting, I think that sentiment at the moment is probably increasing, but quite slowly, people don't have absolute confidence to part with their hard earned money, which is why I think it's important.
(13:57)
If you are exploring the option of investing into property, then considering working with a company like ourselves, like BioFire Property Group or another group that you believe offers good value and good services is important because our job is, and we're committed to every day doing the legwork, doing the research, understanding what's happening within what areas, what movements are we seeing, what sort of insights are we hearing from industry professionals. And there's a lot of that that comes through that you might not get access to in the public domain. So I think investment companies are very important. Be careful with who you work with because some do deliver good value and some don't, which I think is normal across every industry that we operate within. So it's an interesting time. And one thing I'll also say is that for people of a younger generation, 30 year olds, now it's much harder.
(14:56)
The cost to facilitate a deposit compared to 20, 30 years ago is different. We are now having to contribute more of our wage or more savings. It's taking us longer to save from our wages to get to a point where we can deposit on a home. Same for investors. If you haven't achieved a lot of equity recently, it's making it a bit more difficult to expand. But there are things and there are ways that you can go about doing this that you may not have been aware that you can do. There might be a government scheme, there might be a product where you can use your superannuation. Now this is something that's changed as well of late. We have a great product. We align with a company that provides an incredible offering where you can use your super to invest in a property in your personal name.
(15:45)
Now, there's all sorts of benefits that come with that, and if you're interested in exploring that, reach out to us please. It's what we'd love to discuss with you. And even if it turns out that you can't do that yet, at least you know about it and at least that's something to work towards, we can give you some steps to work to towards that so that you can have some clarity moving forward. So I'm going to keep this episode quick today. My last couple have been quite long, so I just really want to get some key punchy information out there for people. Hopefully that helps and delivers a bit of value. Look, I think my finishing guidance on property as a whole is that, as I said, I'm very confident that long-term properties continuing to increase. I think interest rate environments will change in favour of the consumer, will have more favourable lending conditions.
(16:42)
Don't always wait until that occurs. Don't follow the herd, I guess is what I'm trying to say. There's a saying I can't remember. I think it was a Warren Buffet saying, and it's be greedy when others are fearful and be fearful when others are greedy. So whilst things are a little bit slower, especially in Victoria, I mean WA and Queensland are going absolutely nuts at the moment, which would lead me to potentially be a little bit mindful of investing into those situations. But if things are a bit slow where you are and you're just thinking, oh, I'm just going to wait off and see what happens, and there's not many people doing anything at the moment, that could be your signal to actually do the opposite and make a decision to act now because we make our money in property when we buy, not when we sell. And if you're competing against a thousand other people as opposed to 10 other people, it might be a good time to make a decision and back yourself. So thank you very much. I really appreciate your time during this episode. I hope you've got some value out of it. As always, be brave. Go above and beyond and back yourself. I thank you very much for listening and I'll see you next time. Speaker 1 (17:52):

Thanks for listening to The Property Now podcast with Matt elo. We hope you learned something valuable and enjoyed the show. Should you wish to reach out to us, you can do so by calling 1 302 8 9 3 2 4. Or you welcome to email matt@hellobayfairproperty.com au and he'll be more than happy to help. However he can. Have a great day.