Earlier this month I went to a seminar called, “Infrastructure Partnerships Australia Conference.”
Yes, I know it's a weird name, but basically the seminar was about real estate trends and forecasts in Australia.
The people that attended this event were the ones who were at the pointy end of the real estate pyramid, and that is listed property development companies like Stockland, Mirvac, government officials, major banks… you get the drift.
Most of the event was pretty boring, but there were certain talks and information that is relevant to anybody interested in real estate. I thought it would be appropriate for me to tell you some of the things that were discussed there that would be of value to you.
This is a continuation of yesterday's theme of the biggest trend going forward.
If you haven't read it, I suggest you check out Tuesday's email.
Here's one of the highlights of what I learnt at the event.
There is a major push to create smaller houses in Australia. However, culturally we've developed a “massive house” mentality simply because of the large land mass that we live on. No shortage of space in Australia, so big has always been better.
Looking at the statistics, the average size of a new house in Australia is 260 sq. metres which equates to 83 sq. metres per person on average.
Compared with 68 sq. metres per person in America and much smaller spaces in European countries including 32 sq. metres in Britain.
Now, you're probably thinking that both of those countries went through a serious property crash of late. Yes, that's right. But I'll discuss the reasons for that as we move on.
So you can see from the overseas trends that smaller houses are the norm, and it's also one way of keeping affordability down.
This is what many State Governments are pushing for Australia-wide. Smaller blocks, smaller houses, no backyards. Despite this, we have councils that aren't setup to follow this trend which is providing an opportunity for you and me to make money from.
Keep reading to find out how…
Considering that immigration isn't going to change much going forward, this trend is likely to accelerate in the next 5-10 years.
Here's something else that came out of the conference, the constraint on development approvals.
We must move to smaller housing, suits our infrastructure spending – but the lines to get things done are growing longer and longer by the day.
The waiting times for a VCAT application to be heard is 9 months. Only months ago it was 60 days. Now you don't have to go to VCAT to get a permit to develop, you can do that through the council.
Typically it's a 60 day turnaround if you do that, however all of my applications are heading off to VCAT. Now I wont go into the reasons why in this email, but if you've ever dealt with the council or done any form of development yourself – you'll know the answer to that.
So what do you think will happen to real estate prices in the next 12 months if there is such a constraint on supply?
Well, they certainly wont go down – that's for sure.
Here's a thought…
If you could work out which councils have the longest wait for development approval, you could almost guarantee capital growth in that area. I'm attempting to find out how to get access to that information – I'll let you know if I'm successful.
For me, this is a clear trend on where I should be investing in the future. I've spoken about this before many times.
But I know there are fears and doubts…
The biggest concern that you might have at the moment is that we're in a media-driven property bubble and you fear prices crashing… I say media-driven property bubble because every time you pick up the paper, there is sure to be a negative story on how the property market is running out of steam or about to come crashing down.
Here's why I don't believe any of that rubbish…
To have a serious fall in house prices, you need the following:
- Significant deterioration of the employment/labour market. We're at about 5% unemployment which is around the historical low.
- A credit crunch. We already had one of those and we buffered the storm brilliantly simply because we were not exposed to the type of loans that were available in the Northern Hemisphere.
- A rapid tightening in monetary policy. To a degree this happened 18 months ago, but right now things are easing up.
- An oversupply of housing. The reverse is the trend in Australia. We've got a chronic undersupply in many parts of the country. Interestingly the State that has had oversupply has been Queensland and consequently it hasn't participated in the current price increases.
- Massive interest rate rises. Yes, we've had significant rises in the last 9 months, but that's coming off a very low base. We're back to just below the average.
So you can believe whatever you want, but in 10 years time when you look back and scratch your head as to why you've missed yet another property cycle and everything is obvious to you then, it may be too late.
There is no point in theorising about these things and wondering “what if” – just get out there and see for yourself what is happening with a whole new set of eyes.
Once you get access to this type of thinking and information, you'll probably see money-making opportunities that previously you'd drive by and think nothing of.
Signed with Success,
P.S. Get educated first and make educated decisions that will pay you back forever.