Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Finance in Five
170 Plays1 year ago
Get the pulse on the Australian real estate market with this week's Finance in 5! We unpack:
- How interest rate shifts might impact home buying soon
- Why Australians are (and should be) downsizing on land
- Where to find the cheapest properties per square meter in Queensland and NT
- The hidden complexities of property valuations
- Plus, is now a good time to buy, even with uncertainty?
YouTube Video mentioned:Will Rates Dropping Make Houses Affordable Again in Australia? https://www.youtube.com/watch?v=kg8BsnMGXPI
Share your thoughts on this week's topics – find us on Facebook! https://www.facebook.com/groups/209395390748110/
Recommended
Transcript
Introduction to Australian Housing Market
00:00:01
Speaker
Welcome to the Buying Your First Home Podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
Interest Rates Discussion
00:00:27
Speaker
Welcome to this week's Finest in Fiverr. We dive into events that are shaping the real estate market, starting from the top, Simon, and its interest rates. It looks like there's a bit of a change there. The data from the Reserve Bank, obviously this month, rates were held steady, but it doesn't look like it's going to be the case getting to later in the year.
00:00:43
Speaker
Yes, an interesting one. The Reserve Bank did keep interest rates steady, but the question is what's going to happen in the future. Westpac just recently released a report with some pretty interesting statistics. First off the bat is that despite everything, about 60% of people are planning on buying at home in the next five years. That's the highest it's ever been. The most recent high was 53% in 2021. The question is, who is planning on buying?
Market Pressure on First Home Buyers
00:01:11
Speaker
Yeah, it looks like it's a lot of pressure from upgradeers and people that are sort of downsizing as well. And obviously, the migration, like the biggest thing is the people that are upgrading, they've had huge equity gains, they've seen property prices jump 50%, 100% over the last couple of years. And they're using that equity to push other first home buyers out of the market because they're effectively
00:01:29
Speaker
cash buyer so it makes it harder and that's why there's because there's uncertainty as well there's a segment of the market apparently less than sort of 10% of Australians are looking to buy sooner because they're just not sure well are the rates going up are these going to be less affordable what's going to happen there but it kind of comes back to the point that you know we've spoken about simon a couple of times before it's not so much about timing the market it's more your time in the market yeah that's right and i think the important thing here is that i'm sure a lot of people out there thinking let's hold off see what happens with rates
00:01:58
Speaker
And if they start to go down, maybe we'll look at buying a place. But the only issue there is that that's what everyone's thinking. So if you go in with that mindset, then the investors, they're all sitting on their hands probably for the next six months or so to see what happens with rates because they want to make sure they get a return on their investment.
Is It a Good Time to Buy?
00:02:16
Speaker
There's a lot of other home buyers who are just thinking, let's hold off for the moment. But
00:02:21
Speaker
If you do that and then rates go down, then you're also competing with everyone else who has that same mentality. So I actually kind of think if you're thinking about buying a home now and you are ready to do so, it is a good time because the best thing about buying a home now is that rates are probably unlikely to actually go up. The chances are they're either going to rain flat or they're going to go down. And if the rates do go down and you already own a place, then
00:02:50
Speaker
Prices go up when rates go down. You're getting the best situation. If you already own a house and then rates go down, then your house value is going to go up. Your mortgage payments will go down. At the moment, you're competing with less people if you're looking to buy a place now. I think it's just a bit of food for thought and something to consider if you're in the market at the moment.
Impact of Dropping Rates on Prices
00:03:11
Speaker
Yeah, we have a whole other video and an episode exploring the relationship between interest rates and how that affects property prices and potentially what will happen and what has happened in the past when rates have gone down. Sort of spoiler alert and like Simon alluded to then, unfortunately it does push prices because people have more affordability, they have more borrowing capacity, it becomes more affordable so it does have a bit of an impact.
00:03:33
Speaker
on property prices. There's also stage 3 tax cuts that are due later this year. You know, I guess it's making the RBA's job harder as well because they don't want to sort of spur more activity than it has been. But yeah, it looks like things will sort of keep going their way to have at the moment.
00:03:47
Speaker
Onto the next point, Simon, Australians owning less land.
Solutions to Housing Shortages
00:03:51
Speaker
So obviously with the cost of living crisis that's happening now, there's not enough houses, the government sort of flag they need to make in other million houses over the next couple of years, but based on historical figures, it's not really happening. And really the only way to do this is potentially to build more properties on less land, right? Yeah, that's right. Australia is a big country. You know, we have lots of land, but not all of it is livable.
00:04:14
Speaker
And the fact of the matter is people need to have a place to build the house on. And even I personally, I've noticed the changes. So my parents, they grew up in Mitchelton. They're on an 800 square meter block. And, you know, that was a normal sized block back in those days.
00:04:31
Speaker
And my brother bought a house in pretty much the same street where they used to live, and that was half the size. So they're already splitting blocks and building on smaller amounts of land just so people can have a place to live. And part of that comes down to the cost. So prices per square meter in Brisbane, they're up to $1,341. That's 58.1% higher than it was five years ago.
00:04:59
Speaker
And similar story in Sydney. Sydney is at $2,590 per square meter on average at the moment. So land is expensive. We don't have infinite amounts of it. And so you're going to have to look at maybe having a smaller backyard if you want to own a house.
00:05:16
Speaker
Which I think it makes a lot of sense as well because in Brisbane and Sydney, for example, there's already existing infrastructure. So if you can get more density near existing public transport, near existing sort of major arterials, then you can leverage that and you're not having to go out, you know, past Mount Druitt in Sydney, for example, or inland from Brisbane going Ipswich and that sort of thing where it could take two hours to drive to work. There's existing infrastructure in inner city Brisbane.
00:05:38
Speaker
And it's that classic, I don't know if you've heard the saying Simon, and they call them NIMBYs, so not
Increasing Urban Density Debate
00:05:43
Speaker
in my backyard. And it's the big issue with Brisbane at the moment where people who've been there for years and years, they changed the town plan a couple years ago where you could build townhouses in backyards on bigger lots and they've reduced the density saying people don't want big
00:05:56
Speaker
apartment blocks in their backyards. But unfortunately, it's getting to the point where we're in a bit of a crossroads with our housing where we need to start looking at some of this increased density to allow more housing to give people more options. And to your point, like to potentially take better advantage of that trade off of being able to be closer and these might have less space. And honestly, this might be a controversial opinion, but I don't think it's a bad thing.
00:06:20
Speaker
We are one of the least densely populated countries in the world. If you go to visit other countries, other cities, there's a lot more medium density housing, a lot more townhouses. The Australian dream of having the big backyard, it's a good one to have, but it's not the only way to live. And I think you can live happily and well in a smaller piece of land. And it also means that places are going to be more affordable. If your land prices are over 2,500 per square meter,
00:06:47
Speaker
then the more land you have, the more it's going to cost. And I'd say, personally, I'd be quite happy to live in a townhouse. Even an apartment, I think it's good to consider those options, especially with housing affordability where it is. Yeah, and it's definitely that trade off of sort of like being close to the convenience or having the space being further away and what that means to you. You know, personally, I know I said the story before when I was living on the Gold Coast.
00:07:11
Speaker
commuting two hours either day ended up not being worth it for me. Having the time on the beach was really nice, but burning 20 hours a week sort of commuting, it wasn't nice at all. So on to the next point, Simon, owning no land, I guess this is a similar thought process or you know, this article goes through the idea of owning no land and this actually could be the solution. More people like you, you know, happy in an apartment lifestyle could help make things more affordable.
00:07:37
Speaker
Yeah, exactly. Just like we were talking about, having smaller amounts of land means that things are typically less expensive. And if you live in an apartment block, you own technically whatever percentage of the land on that apartment block. If you're in a high density apartment with like 30 floors, that doesn't amount to much. But I don't see a problem with that personally. Building more homes on existing land is a way to get more homes for more people.
High-Density Living as a Solution
00:08:06
Speaker
And it's better for infrastructure as well. It's pretty hard to have a good public transport network if everyone's living on a thousand square meters or acres of blocks. It's kind of like the situation with the bus or driving a car. You've got one person in a car or you can fit 50 people in a bus for twice the space. And considering maybe we need to be looking at heading in that direction for property in the future and building up more of that density, that's kind of where I sit on that.
00:08:34
Speaker
Their food for thought there. So on our next point, the way to value properties.
Valuation Challenges in a Fluctuating Market
00:08:38
Speaker
So obviously, land size is an important consideration. In a lot of our cities around Australia, we've seen some pretty sudden, some big increases in movement in market prices.
00:08:50
Speaker
It can be hard to judge, right Simon? Like if you're out there looking, you just want to get a report and say, well, the report says this house is worth 800,000. I'm going to offer 800,000, but it's not always that simple. Unfortunately, it's never that simple. The automated reports are a good starting point. They give you a price range and a bit of an idea about where you could be in terms of how much that property is worth, but it's so much more dynamic. Property markets are always changing and
00:09:19
Speaker
The most important thing is like what is actually happening in the suburb where you're buying at the moment. So rather than just take the report and say, oh, yeah, that's 800,000. I'll offer them 800,000 and I'll get the house. Kind of need to dig in a little and do your own research. Look at what's been selling in the local area for how much and comparing the details as well. You got to compare apples with apples in this situation. So if you've got a two bedroom house,
00:09:48
Speaker
with two bathrooms and it's selling for $500,000. If you're comparing that with a four bedroom house, then it's going to be completely inaccurate. The more detail you have and the better comparables you have, comparing to the size of the yard, how old the house is, all those things. If you can find good comparable houses that have sold recently in your area, up to three months, the sooner the better.
00:10:14
Speaker
then that gives you a much more accurate basis on how much the house you're looking at could be worth.
00:10:20
Speaker
Yeah, no, no, it's very true. And it's the same, like we've seen big market movements in Brisbane, for example, I was going through some reports with a couple yesterday and the market's gone up 14% in the last year. So you need to be adjusting prices like that and you know, if something's sold for a million dollars a year ago, you need to be adding 14% to that and then looking at what we're saying realistically in the current market, it's going to sell for that much more to adjust those expectations and just help prevent sort of disappointment.
Exploring Affordable Regions
00:10:47
Speaker
But, you know, it's not all gloom and doom. There are some sort of cheap pockets. And Simon, you had an article there with domains cheapest properties per square meter in Queensland and Northern Territory as well, actually.
00:10:59
Speaker
Yeah, I thought since we've been talking about land size and prices per square meter and how expensive they can be, why not have a look at where you can really get the best bang for your buck? And surprisingly, Queensland wins as the most affordable. There's a town called Cuminia. It's about 80 kilometers west of Brisbane. And you're just paying $27 per square meter there, which is the tenth of the prices if you're buying in Sydney. It's a pretty good deal.
00:11:26
Speaker
Pretty good commute too, but it gains a bit every day. So we just need a bit of flexible work from home policy there. But yeah, it's possible, but it needs to work with your lifestyle too, doesn't it?
00:11:37
Speaker
I mean, we talk about it is kind of funny in the sense you could get a bargain deal 80 kilometers away from the city, but it comes back to the question of what's more important? Do you want to have a large block of land with a big yard and sacrifice the location? Or do you want to maybe consider having something smaller and being closer to your work and to centers of restaurants and where things
Conclusion and Personal Preferences
00:11:58
Speaker
are happening? And this is kind of an example of that. You know, I'd say either choice is good. It's up to you when you're buying what you think is more important. Absolutely.
00:12:06
Speaker
What's up this week, guys? Hope you enjoyed the finals in five. Let us know. Leave a comment, hit us up on our Facebook. I'd love to know if you want to hear more of, if you want to hear less of. Until next time, we'll see you then.