‘Those who hold the gold hold the power.’ In this instance, ‘gold’ is shelter. This essential commodity is fast becoming incredibly scarce and will soon be worth a heck of a lot more.
In this report, I will step you through each of the various possibilities for addressing the rental crisis and demonstrate why a property boom is inevitable.
Governments must choose between even higher rents and increased homelessness or changing the landscape to support large volumes of extra rental supply. The response to the dire shortage of this essential commodity in Australia will trigger another property boom before too long.
Believe it or not, it may be as soon as 12-months’ time, but the actual timeframe will be determined by the pain threshold of bureaucrats.
One would be wise to get busy and buy more ‘gold’ – pronto.
Because the biggest beneficiaries of a strong surge in asset values are always those who were already in the market before the surge commenced.
Now is not the time to fold ‘em
The 7 million Australians that live in rental accommodation are all currently (unwittingly) part of a game of landlord lotto, created entirely by governments [here’s how it happened].
Now and for several years yet, a tenant coming out of a lease is a tenant on the brink of pseudo homelessness.
Given that properties don’t grow on trees, the leading indicators point strongly towards 100,000s of Australians living in makeshift shelter by the middle of next year.
Tenants all over Australia should be crossing their fingers that their landlord does not become another one of the countless property investors who got fed up with being belted by a political baseball bat and decided to sell.
The frustrations felt by landlords from the stream of property policies that work against them is now merging into anger.
With more poor policies to come, it is important that property investors do not let emotion be the cause of poor financial decisions.
To steel a line from the late great Kenny Rogers: know when to hold ‘em and when to fold ‘em.
Those who currently own gold would be wise to hold their gold.
Those with available equity and stable cash flows should buy more gold. Now.
Yours truly is certainly buying more of this essential commodity [just like this].
As recently as last month, Propertyology’s buyer’s agents purchased 18 properties for our investor clients in 8 different cities across Australia. They are all worth more now than the start of this year and they’ll be worth more again in 1, 5 and 10-years’ time.
Successful people adopt an ‘if it is meant to be it’s up to me’ mantra for important things in life.
The current landscape
Of the 3.3 million properties in this country that are used for rental purposes, only 32,948 (1 percent) were advertised for rent at the end of this August.
For perspective, there were 50,803 properties advertised at the same time 10-years earlier when the national population was 3.2 million smaller.
Every single tenant searching for rental accommodation – voluntarily or forced by yet another landlord selling – is a candidate for having to make do in a garage, a car, a couch or a tent.
An overwhelming majority of existing property investors – those who supply 91 percent of Australia’s rental accommodation – are currently preoccupied by paranoia such as interest rate rises, inflation and ridiculous doomsday commentary.
As each day passes, more properties will keep being removed from the rental pool and even more tenants will be forced into second-world accommodation.
But current policy settings are not at all supportive of attracting more rental supply.
Folks, the baseball bats will keep swinging at property investors for a while yet.
For example, the Queensland state government just introduced a land tax rort which will hit hip pockets of many thousands of landlords all over Australia.
Then there’s the utter lunacy proposed by the federal Greens to place a 2-year ‘freeze’ on investor’s rental incomes.
My message to all existing and wannabe property investors is to cop the hits on the chin. Remain focused on your future. The ‘gold’ that you own will soon be worth much more.
Channel your inner Tubthumping: “I get knocked down, but I get up again. You’re never gunna keep me down”.
While government actions continue to suppress rental supply, the same cohort have just turned the dial right up for rental demand.
This month, the federal government increased the (permanent) overseas migration threshold to 195,000 people per year. It is a key policy to attract much needed skilled labour for the 500,000 jobs that are currently advertised but we can’t fill.
That equates to extra demand for 75,000 properties per year.
In their marketing pitch where they pretend to be Santa Claus, the federal government said they were allocating $575 million for ‘affordable housing’.
Sound big?
Yeah nah – it adds up to an extra 6,000 dwellings per year for the next 5-years (assuming they don’t sell any of their existing rental properties).
Oh, Australia has also been receiving 10,000 applications per week from international students (annualised 500,000 per year) and we have just extended visa terms to 6-years.
The education sector can’t afford for those applications to be rejected and the economic benefits to Australia broadly are significant, but where will they all live?
Propertyology predicts that the asking price to rent a standard house in large parts of Australia will increase by $100 per week or more over the next 12-months.
And, if governments make more of the wrong decisions, more landlords will sell, more tenants will be displaced, fewer new investors will have confidence to use their hard-earned money to add more rental supply and annual rent prices will increase by circa $10,000 by early 2024.
Australia as we know it will soon be unrecognisable.
Parks, camp sites, shipping containers and garages will ‘accommodate’ 100,000’s of people who were displaced from conventional housing.
Civil unrest is a real possibility.
Blood will be all over the hands of politicians and regulators.
It will not be until all levels of government decide that the pain is too much for the nation to bare that they will, inevitably, adopt a whatever-it-takes-to-fix-this attitude.
Property boom is the only option
The frustrating thing is it that it has been blatantly obvious to all practical and realistic people for several years that the only viable solution is the same one which worked so well for more than two centuries prior to the government shenanigans.
Pretty soon these plonkers will have no choice other than make the right decision.
They will have to choose their poison from these scenarios:
- 200,000 rental homes suddenly fall out of the sky. Unlikely.
- Governments go against the 30-year grain of selling off rental stock, they ignore their bulging debts and budget pressures and decide to fund the enormous shortfall in the national rental pool. Next.
- $70 billion is suddenly discovered under a rock. One can dream.
- The house fairy waves its wand and gives all tenants a property of their own. Abracadabra.
- 100,000’s of tenants miraculously find a wad of cash under the mattress, they put it towards paying stamp duty and a deposit, they prove to their bank that they have stable jobs and good credit histories and they all become homeowners. There’s a school of fools who actually believe every time an investor sells, a tenant becomes a first home buyer. Mr Bean couldn’t write material this good.
- The plonkers accept that if nothing changes nothing changes. They swallow their poison and accept there really is only *one* sustainable solution – the everyday Aussies who have already funded 91% of Australia’s existing rental pool.
Sanity will (eventually) prevail whenever governments accept responsibility for causing more than enough pain.
At that time, supporting everyday Aussie property investors will require a complete review of the aforementioned grit that they clogged Australia’s housing and financial system with.
Some current policies will be reversed. APRA will have to review credit policy soon. Investors may be incentivised to participate. Pressure for genuine stamp duty reform will intensify.
And don’t rule out some interest rate cuts in (say) 2024.
More rental supply requires more buyers of real estate. More buyers will mean more competition. That precious ‘gold’ will significantly increase in value.
Another period of double-digit annual price growth in the not-too-distant future.
Focus on your ‘purpose’
Set goals, use financial discipline and take advantage of the 3-biggest investment resources (time, compounding and the power of leverage).
Don’t let the current toxic atmosphere of property politics distract you from making progress for your financial future.
Visualise what you want your future to look like and get busy making it happen.
If you’re thinking about peripheral stuff such as inflation, interest rates, the soft underbelly of Sydney and Melbourne or the general rubbish reported in the media each day your head is not in the game.
Always remember, Sydney and Melbourne are just 2 of 200 individual townships in Australia with populations of 10,000 or more.
Contrary to the generalistic commentary, asset values (and rents) are still rising in large parts of Australia. More importantly, the underlying property market fundamentals right now are as good as they’ve been for many years.
On the balance of probability, we may be only 4 to 6 months away from the RBA getting comfortable with its ‘new normal’.
When they do, Propertyology expects the current public caution to quickly turn to confidence.
Regardless, supplying a sufficient volume of that essential commodity known as ‘shelter’ is a non-negotiable.
Buy more gold, folks. Now.
Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.
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