May 17, 2021
Property prices have been climbing at a breathtaking pace in
This has been good news for homeowners but heartbreaking for
At the same time, there have been mixed messages in the media
about what’s ahead.
Of course, there’s always the Negative Nellies wanting to tell
anyone who is prepared to listen to them the market is about to
crash, but other more solid commentators are suggesting our
property market is slowing down.
And I agree, I believe the pace of capital gains has peaked, but
I’m not suggesting home values are about to dip, far from it.
Rather I believe we’ve moved from a peak rate of growth to a
pace of capital gain that will be more sustainable.
I was recently interviewed by Jarrad Mahon for his Perth
Property Insider podcast, and because the questions he asked me
were more general in nature, rather than related to Perth I asked
his permission to replay the interview with you as I hope you’ll
get benefits from my answers to his questions.
You’ll hear me answers questions like how much more life is left
in the property cycle and you’ll be pleased to know that it’s not
too late to be early for this property cycle – I’ll explain how
long I believe is left in this cycle and where the opportunities
Topics I discussed with Jarrad Mahon
- Last year when many of the bank economists predicted a 15%,
20%, 30% fall in property values I disagreed with them
- I’m on record in March and April last year suggesting that
well-located A-grade homes and investment-grade properties would
only fall about 5% in value and secondary properties would fall
close to 10% in value and I got that right.
- I also called a turning point in our property markets in
October last year when we could see on the ground what was
happening long before it showed up in the official statistics.
However, I didn’t really expect the market to rebound so
- All the property markets are stronger than they were 12 months
- In the last three months, Melbourne’s grown closer to 6%.
- We’re in a cycle of upgrading
- Based on affordability I expect 20- 25% growth this cycle
- And while this will be a general increase in value around the
Australian property market some areas are going to outperform
others, as they always do and a lot of this will have to do with
- High-end properties will outperform, and capital cities will
outperform the regions
- In cities, the apartment market will languish
- While normally investors make up around 30% of our property
markets currently, they’re making up around 20% of all property
purchases. This will increase and as more Australians become
comfortable with their financial situation and hear how well the
property markets are performing, we will have a whole new wave of
property investors, as has happened every other cycle.
- The unfortunate thing is that most investors will fail – they
will not get past the first investment property and if history
repeats itself 50% will sell up the properties within the first
- Affordability and the deposit gap will slow growth
- Apra and the RBA said they are not going to interfere as long
as lending remains responsible.
- It’s unlikely interest rates are going to go up, but we could
- It’s not really population growth that drives our property
markets and more demographics which in part includes how many of us
there are but also how we want to live and where we want to
- Population growth per se does not cross property price growth
family formation does – my daughter just had a baby but doesn’t
need any extra house.
- The return of cashed-up ex-pats is having to property price
growth. It has been estimated that hundreds of thousands of people
return to Australia over the last year, with many of them coming
from cities that have more expensive property markets. Many are
returning with plenty of Real Estate dollars behind them off in a
stronger currency is the Australian dollar which supercharges their
buying power even more.
- Ex-pats from expensive cities like London, Hong Kong, and New
York often don’t consider our property prices unaffordable I’m not
happy to pay whatever is necessary to secure a prestigious property
in the desired location
- Immigrants often rent for a while because they’re not sure
where to live and this is definitely affected our rental markets,
particularly in the big capital cities.
- Immigrants don’t know where to buy – all they know is there a
place of employment or maybe the university, so they are often
start as tenants.
- Australia has a business plan to increase our population to
40,000,000 people by 2050. We plan to get to 30,000,000 people by
2030 – that’s unlikely to happen – more likely to be 29 million.
But that means if you get into the property market today, you’re
ahead of 3 ½ million other people are going to be buying property
in the next 8 to 9 years
- There is no doubt that people move from one location to another
because of affordability, but more important than that is
- The ability to work, live, and play all within 20 minutes’
reach is the new gold standard desirable lifestyle.
- Imagine being able to carry out your daily activities within a
20-minute walk from home.
Get a range of my eBooks and reports as my gift at
Jarrad Mahon Investor’s
Edge and the Perth Property
As our markets move forward why not get the team at Metropole to
build you a personalised Strategic
Property Plan – this will help both beginning and experienced
Shownotes plus more here:
It’s not too late to be early this property cycle with Jarrad
Some of our favorite quotes from the show:
“It really has been just the huge change in consumer confidence
that I don’t think anyone really expected.” – Michael
“I say this is a cycle of upgraders, and it’s happening at all
levels.” – Michael
“Clarity is knowing exactly what you want in life, and what you
need to do to get what you want.” –Michael Yardney
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