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Finance in Five
69 Plays5 months ago
In this episode of the Buying Your First Home Podcast, Jayden and Simon discuss the latest trends in the Australian property market, focusing on rising property prices in various capital cities. They explore how Brisbane has now become the second most expensive city for housing, overtaking Canberra. The episode also highlights the supply shortages in cities like Perth and Adelaide, and the increasing number of million-dollar suburbs in Brisbane.
Highlights of this episode:
- Brisbane overtakes Canberra as the second most expensive capital city in Australia.
- The Australian Home Value Index rose 0.8% in May, marking the 16th consecutive month of growth.
- Perth, Adelaide, and Brisbane experience significant price growth due to supply shortages.
- Hobart and Darwin see a decline in property prices.
- Sydney's property market shows signs of recovery after a prior drop.
- Brisbane now has 73 suburbs with a median house price of over a million dollars.
- Formerly affordable Brisbane suburbs are now joining the million-dollar club.
Do you need help navigating the home buying journey? Get a free pre-approval and explore your options with Hunter Galloway – a trusted mortgage broker for homebuyers across Australia. Call 1300 088 065 or visit huntergalloway.com.au
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Transcript
Introduction to the Podcast
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.
Brisbane's Real Estate Surge
00:00:26
Speaker
Hey guys, welcome to this week's Finest in Five. We take you through the latest in property and finance, Jayden and Simon here, starting from the top and Brisbane's finally out ahead. It's not state of origin. We're talking about property prices and I guess depending on which side of the market you're on, this is probably good news or it could be bad news. Brisbane has overtaken Canberra as the second most expensive capital city for housing just last month. So overall, the Australian Home Value Index, which is something that they use to judge the value of homes across Australia, it rose 0.8% in May, which is the 16th consecutive month of growth. And this is where Brisbane finally came out ahead of both Canberra and Melbourne and sitting just behind Sydney in terms of the most expensive capital city in Australia.
00:01:13
Speaker
The strong growth in some of the mid-sized capitals, Perth was up 2%, Adelaide 1.8%.
Supply and Demand Dynamics
00:01:18
Speaker
But yeah, Brisbane 1.4%. It was surprising with some losses. Hobart was down 0.5% and Darwin by 0.3%. Sydney crept up by 0.6%. So we have seen a lot of those markets like Perth and Adelaide that shortages are really driving this price growth and putting a lot of pressure on there because there's less supply, more buyers pushing the prices up. Yeah, in fact, extremely low levels. Even in Perth and Adelaide, the supply is actually more than 40% below the five-year average. So a lot less properties available to buy. And Brisbane is not far behind, 34% below the five-year average. So there are less houses that are on sale at the moment, and people still want to buy them. So that's putting this upward pressure on prices, which
00:01:59
Speaker
kind of is driving that growth. On the flip side, Hobart's listings are 41% above the five-year average. you know There's a lot less demand there, houses aren't selling as quickly, and that kind of explains the sort of decline in growth that we're seeing there. Yeah, Sydney's been one of those ones where it's a bit up and down. There was an overall price drop of 12.4% before there's been a bit of a recovery. We're now back at the top of a 14.1% rise. to get us where we are.
Brisbane's Million-Dollar Suburbs
00:02:26
Speaker
Yeah. And what's interesting with Brisbane is a few months back, actually, Brisbane was ahead of Melbourne in terms of the median dwelling value, which includes both houses and units. But that was mostly explained by Melbourne having a much higher density of units and you know units are less expensive than houses. So that tended to drop down the median dwelling value overall. But now Brisbane is actually above and ahead of Melbourne.
00:02:52
Speaker
in terms of the median house value as well. So it's not just the density of different types of properties. Brisbane is well and truly more expensive to buy in than Melbourne at the moment. So this can be good or bad news depending on where, like I said, you're looking in the market. If you own a home, good news, you've got more equity, things to do. But if you're trying to get into the market, it is getting tougher. And we're seeing that with the rise of million dollar suburbs in Brisbane, like 10 years ago, I wouldn't have thought about it. but You know, interestingly, formerly affordable suburbs in Brisbane are joining the million dollar clubs. I suppose specifically we're seeing Nudgee, McDowell, Calamvale, Mount Gravatt East and Wynnum joining this million dollar suburb club. Yeah. And sort of looking at it in a broader context, Brisbane now has 73 suburbs with a median house price of seven figures or more.
00:03:41
Speaker
And there's a lot of things that are driving this growth. Primarily it's just this unstoppable demand. You know, the demand in Brisbane has been high for a long time and it continues to be high. And we're also seeing some effects from gentrification. So if you're not familiar with that term, gentrification is a term for when older suburbs or older areas become sort of
Gentrification's Impact
00:04:05
Speaker
renewed. So, you know, you take places like Fortitude Valley, for example. 20 years ago, 30 years ago, my parents told me that it wasn't safe to go out in Fortitude Valley. It was a dangerous place, and the only people going there were the crackheads and the druggies, basically. you know It wasn't a very nice place. Some people still think that, but it's actually changed a lot in terms of you know modernization. There's cafes, bars, restaurants, fancy places.
00:04:36
Speaker
And that kind of gentrification drives this growth. you know It becomes more desirable to live in a suburb, and then that desire drives the demand, and then the demand causes the price growth. So we're seeing this in some of these broader Brisbane suburbs, like Stafford is another example where there are lots of these homes that were built 30, 40 years ago.
Investing in Emerging Suburbs
00:04:56
Speaker
They were a little bit rundown. And because people have been pushed out of the inner city circle when they're looking to buy, They're buying these older homes and renovating them or knocking down and rebuilding. So kind of renewing these suburbs, which does bring that price growth. And we've definitely seen that in these specific suburbs, like some of the ones I mentioned before, Nudgee, they get to the benefit of that next one along. There's much more expensive suburbs next door as far as Clayfield or even Ascot further along, but it's had that impact of some of those more expensive suburbs. People were priced out and on the next one, the next one along to Nudgee.
00:05:31
Speaker
yeah What's next is the ones that are joining because people are looking for that location, the amenity, and the lifestyle that you can get there. Some of the future candidates i guess' using a similar approach could be Scarborough, which is near Sandgate, in the north there's Salisbury, in the inner east because obviously Greenslopes, Annerley, all these places are quite expensive now, Arcanubia, or even Manly West out on the bayside that we're finding. It's starting to get more and more expensive, but if you're looking, it could be good places to start if you kind of like some of those other areas that are nearby. Yeah, I think one of the takeaways here is to, if you are looking to buy a home is to look for these emerging suburbs. The next one along is a great place to look at buying a home now because in a few years time, as the market drives and changes, you'll be in a position to
00:06:16
Speaker
you know i get a lot of equity growth in your house which means you'll have more home value and if you do want to move to a suburb that is more desirable for you then you'll have the equity which will allow you to do that. So you know looking for areas with good growth potential is a great strategy for your first home and you still want to make sure it's affordable though so there's no use looking at a place like Nudgee for example at the moment if your budget is only 800,000 I'd suggest you kind of look forward and look sort of further out and see where the next development area could be and sort of have a look at those and go from there.
First Home Super Saver Scheme
00:06:52
Speaker
So if you're on the planning stages, one thing that has been really grossly overlooked is the first home super saver scheme. So the first home super saver scheme allows a concessional super contribution taxed at 15% instead of your normal rate, which could be up to 45%. That means you could save up to a couple of thousand dollars extra, you can add a contribution up to $50,000 to help accelerate your savings. Yeah, and despite it being an amazing opportunity for saving up your deposit, we've actually seen a decline in usage. So last year in 2023, there was 8,700 people who use the scheme, and that's down from 9,500 in 2022.
00:07:34
Speaker
And I think the main reason that people aren't using this scheme is it sounds pretty complicated. You've got to put your money into your super. You've probably need to get the accountants involved. It's all this financial stuff and people tend to think ah it's too hard. I won't worry about it. You know, well just save the normal way. But if you think that way, you're probably missing out on a great opportunity. And it's definitely one you need to be a bit prepared for because there are limits. You can only make up to $15,000 a year in extra contributions to your super that go to that deposit. And it's only up to a maximum of $50,000. So it's not fantastic if you're trying to buy a home next week and you decide to put a bunch of money in your super, it uses a deposit, but it's definitely good if you're planning in the next year, two years or three years.
00:08:17
Speaker
Yeah. And in terms of how much you can save, if you were saving, you know, $30,000 contribution over a two year period, then you will actually will save $5,819 in tax in savings for that. So, you know, that's basically free money for your deposit in a sense. Yeah, there's a bunch of different calculators where you can test this because like you said, Simon, it can be thousands of dollars. Like that 5,000 can cover half your stamp duty. It's huge. It could be furniture that you literally can do with this game if you organize. But yeah, there are some extra steps you need to potentially set up with your HR and get them to take part of your salary and do as a salary sacrifice, which feels like it's hard, but like it's literally an email. I can say just, you know, max out my contribution to this, this financial year. And if you are you know doing some tax planning before June 30 in the financial year, it could be worth, like you said, talking to an accountant because they might be able to set up strategies. There are cutoff dates as well. Apparently the Australian supers cut off is the 25th of June. So you can't leave to June 30 to make these contributions if you're trying to get in for the end of the tax year, but it could be literal thousands of dollars that are going to help go towards your home purchase by doing
Tax Changes and Savings
00:09:24
Speaker
this game. So I would definitely suggest looking into it.
00:09:27
Speaker
Yeah, and on the subject of tax savings and tax cuts, there is some pretty big changes upcoming from July as well, which I think we've covered previously, but you know let's go into this a little more detail. I think everyone's probably feeling the pinch at the moment in terms of retail spending. It's more expensive just to live and to save, and houses are getting more expensive. and That's certainly something that the statistics are showing as well. At the moment, there is less retail spending. you know Consumer sentiment is a lot lower, so people aren't really spending as much because they're concerned about the cost of living.
00:10:04
Speaker
So these changes in the horizons maybe can you know give a little bit of relief for that. So there's a couple of things here that are going to make life a little easier. You may have heard that there is an electricity rebate of $300 per household with some additional state specific rebates as well. And lower electricity prices cuts of 2 to 4% starting in July. So I know that's one good change that can help you feel a bit more positive. yeah There's also the stage 3 tax cuts that are coming into effect in July. so Just as an example, if you're earning $67,600, pretty specific example, but if you're earning that, you receive a tax cut of $1,369 annually or about $52 a fortnight. so
00:10:47
Speaker
it's going to help. An extra $50 a fortnight is huge. You can put two bills, everything else will be savings. And there's wage increase too. So Fair Work Commission declared, made a decision on award wages. So there's an expected increase of 3.6 to 4%. So again, that actually could be an extra $65 a fortnight based on that similar salary. So it can make a huge difference for some of these changes. There is some relief coming. But on the flip side as well, the governments and the reserve banks be watching this and saying, well, if people end up take that tax cut and spending it on holidays and on buying shiny things in retail that it could put pressure on inflation. It could mean rates will have to rise. so It's an interesting one. It's really good for part of the economy. Definitely, it's going to be helpful having that extra money. The banks and a lot of the forecasters, assume people are going to save it just because of
00:11:36
Speaker
the way that the market is now, but it will be interesting to see how that plays out later in the year too. So I guess if you don't want to see inflation and rate rises, maybe keep the money in your savings deposit rather than go out on that holiday to Bali. But you know, honestly, I'd say that it's a smart idea to if you do get that increased disposal income or even other types of income, like a tax return, any sort of lump sum payments that are outside your normal salary or wages, then those are great opportunities to put aside for saving up for your deposit as well.
Housing Supply and Rent Growth
00:12:05
Speaker
So the last one here, Jayden, there's some new data.
00:12:08
Speaker
that's out on the housing crisis solutions. And it kind of shows that the solution is starting to work, but pretty slowly. So, you know, just to give some context here, if you are a renter at the moment, I'm sure this is no surprise to you, but typical rents have increased by 9.1% over the past 12 months. And the problem is a lack of supply, much like with buying a home, there's not enough houses for people to rent, so there's more competition. And the real strategy here, which is the government's a main game, is to build more homes over the next five years. And there's some data to show that this is a good strategy. It's going to work. So regions with more home completions in recent years, so more apartments or houses being built, have seen slower rent growth compared to the national raises in rent.
00:12:57
Speaker
Yeah, so that long term effects of the new supply have lowered the housing costs and have helped lower the rents. But it really relies on the government hitting those targets. The national cabinet's target is to build 1.2 million homes over the next five years. And the current pace is only making about 170,000 homes a year. So it's short by 240,000 a year. So there's still a pretty big shortfall there to get those lofty targets. Yeah. And one of the interesting kind of sidebars from this is part of the reason why it's the construction rate and pace is lower is because of government investment into infrastructure and other large projects.
Infrastructure and Construction Impact
00:13:36
Speaker
So you know there's only so many builders to go around. So when the government is going out and building these big projects, they're actually pulling resources away from the home building industry as well. So there's a bit of push and pull here in terms of
00:13:49
Speaker
trying to hit that construction pace while still trying to achieve their goals of infrastructure. So it's a tough job for the government and for anybody involved in the building industry. Let's just hope that we can see some changes here that'll help them reach that $240,000 home annual target, which will definitely decrease the pressure we're seeing in terms of this housing crisis.
Conclusion and Call to Action
00:14:12
Speaker
That's it for today guys. Hope you enjoyed the podcast. So we went through Brisbane, obviously some market movements there and becoming the second most expensive capital city in Australia. We went through some of the multi-million dollar suburbs and just thinking about that strategy, I know it can feel a bit confronting if you are trying to get in the market thing or I'm getting priced out. What do I do? Well, there's always that next one along in the sort of suburbs that are experiencing gentrification. And if you are saving,
00:14:37
Speaker
Look at that first home super saver. It's huge. It could be really helpful. It could be in the difference between getting in the home this year to next. That extra 5,000 go huge way. At Hunter Galloway with a home for home buyers across Australia, if you need help with finance, buying home or refinancing, hit us up at huntergalloway.com.au. Until next time, we'll see you later. off