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This is a Momentum Media production. Nerd alert! Property nerds. The home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Welcome everyone, and we're here for another episode of the Property Nerds podcast.
And it's that time of year, 24th of December, Christmas around the corner, literally tomorrow. Jackie, what's on for Christmas plans for you, mate? Mate, it's been a pretty big year, so I haven't had a break at all. So I'm due for a two-week just sitting on the couch, doing nothing, just recharging. And then, yeah, because I'll be straight back into it in January, I bet.
Mate, you've got a few little ones. I don't think doing nothing's that easy, right? Yeah, well, just being present with them, you know, not having to always jump and think about work and have all these things going in my mind. I think the two-week break is just spend time with family and just recharge. Yeah, it's going to be good.
It's going to be good. Are you guys fully into Christmas? Because I know Lauren's got Lebanese, right? Yeah. And so you're an Aussie background.
Do you guys go hard on Christmas? What's the spirit like at home? Yeah, well, we're going to host Christmas this year. Because most of my family have kind of, you know, gone into retirement or the younger ones don't really have a house that they could host. So we're pretty much the only ones that can host now.
So, yeah, we're going all out. We're going to have the Christmas cricket tradition going. So, yeah, the one day a year we actually play cricket or watch cricket is Christmas, you know. Bowler, batter, what are you doing? Oh, we all have a go, mate.
It's just a bit of fun, a bit of banter. But, yeah, we'll be going hard on Christmas. Mate, wins are not cricket in the Indian household for me, mate. It's all year round for me. But, no, it's good.
It's good. And in terms of the year, like obviously we're closing off the year with this episode as well. What's been some big highlights for you? I know we haven't been here together on this show for the whole year. But since this year, what's been the big highlights?
Mate, I was literally just talking to my wife about this. Because, you know, coming around to December, we just think back and go, wow, like this year. We always say this too. Like we always think back ever since we really got into finance, we were kind of just like, wow, what a year. What a year it's been.
This year especially is because just over a year ago now, we started 4acre Financial. And that, you know, when we started that, it wasn't planned. It was kind of out of the blue. And we just didn't know what was going to happen. We didn't know what the next month was going to look like, what the next three months was going to look like.
And, you know, we just worked so hard for each other and to look back at the year we've had. Very grateful, man. Mate, this was a year of grind for you, for sure. Yeah, no holidays, no days off. I think I was doing weekend, Saturday, Sunday appointments all the way up until like last month.
Like it was just insane. We had to. But, yeah, to look back and reflect on it, very grateful. Mate, that's a business owner's dream in paradise, though. Like you're in a situation of you do what you love and it's your first year.
And to be blessed with that level of, you know, support from your customers, people having that advocacy for what you do. You're obviously making a massive impact for people and then you to be full like that from the start of the year to now. It's phenomenal. So, mate, hats off to you guys. Well, mate, today we've got the over, not oversupply.
That's not the best way to look at a white paper. Undersupplied regions. Imagine if someone's going, here's the oversupply. You know what? That'd be a good idea.
Going into oversupplied markets so people know a bit of what to stay away from. But, mate, today we've got the undersupplied white paper in terms of the big Australian housing crunch. And this is research we've released here at InvestorKit, which reminds me, if you're tuning in for the first time and this podcast is new to you, my name's Arjun. I'm the CEO at InvestorKit Buyers Agency. We're Australia's Buyers Agency of the Year for 2024 and 2023.
First to do it in history, back to back. And we're actually trying to do it for the third time in a row with the awards in February. So that's around the corner. So fingers crossed. But we're here from an investment side in terms of buying properties to scale a portfolio.
And then Jackie from Fouracre Financial here when it comes to just really getting the best position of your finance so that way you are set for scale. And I think that's one thing not many people talk about. People talk about getting the best rate or getting the best service. Those should be a given, right? But that aside, what's more important is actually scaling a portfolio.
And that's where Fouracre Financial's in the house. So we're both here from the property nerds and sharing what we love sharing, which is the data, the insights, the tips, the strategies, and all things finance and property. And so we've got that going on today in the research paper here for Australia's 25 most undersupplied markets and their supply shortage score. So keen as to jump into this one, Jack. You've had a read.
What are your first initial thoughts? Well, I understand that. I mean, if you ask the layman and you ask them to say basically on the current market, how do you identify a shortage of supply? I think most people would kind of understand that on a base level. But in this report, you also look at the long-term shortages.
But how do you really look at the long-term shortages? Because obviously you're looking at the current market conditions and all that. But to really look at it from a long-term aspect, and especially when you're investing in property, most people are thinking of that 20, 30-year outcome. So how do you, yeah. Yeah, it's a good question.
So firstly, for anyone following along with today's episode, this research paper, if you want to follow along with us or hit pause after I've shared this info with you, grab a copy and then come back to it so you can see what we're seeing. It's investigate. com. au. Click on the property research button, and that'll take you through the latest white papers.
And that's where you can find Australia's housing supply crunch, FY24 slash 25. Totally free resource to download. So go check it out, whether it's during this episode and you're tuning in or you want to grab it afterwards and have a good look at it, please do. But Jack, coming back to your point of undersupply. So firstly, we've created a methodology around what we call a supply shortage score, or internally we call it the SSS.
And with that, it's got a few core areas that we measure. So the first is future supply. And this is looking at building approvals in the pipeline and then using that as a percentage of current stock. So for example, if you had 100 properties in an area or a suburb, and then you had three properties in approval stage that are in the last 15 months, then that's 3% of incoming supply because that's three of the 100 houses, right? Now, very rarely will an area we look at only have 100 houses and make that number much bigger, but that's the example of future supply.
And future supply doesn't happen overnight. It takes years to come in. But in isolation, that's probably the biggest learning. No indicator in Australian property data, in my opinion, is very valuable in isolation because we've seen many instances where future supply might be high percentages and then it still grows even for the next few years. And the reason why is because one thing many people forget is future supply doesn't all come out at once.
It comes out in stages. Also, it doesn't all come out at the same price. It could come out at different prices. Therefore, what might be today's price for something, if the future supply comes up at a few hundred thousand higher, that's actually price growth, right? And then lastly, you don't look at future supply alone because if future supply, say, is 3%, three out of the 100 homes, what happens if there's 50 listings for sale?
So that's pretty bad of the 100. But what happens if there's only two listings for sale, meaning you could have a huge 3%, 5%, 7%, 10% building supply, but if there's nothing for sale, it's not much being added on. So it's all about looking at it relatively. But that's the first point. The second one we look at is established supply.
So that's just the total listings in the area. And with that, we're looking at it in a few different ways. So we're looking at it static, like what it is now. We're looking at it as a proportion of the area. We're also looking at it from last one year, three year, five years, so we can see short to long-term trends.
And then we're looking at percentage change. So it's like, hey, did it decrease 10% or 50%? And then we move over to price pressures. So price pressure is an interesting one. This is about how much heat's in an area.
So yes, supply is the main focus, but supply can But when they bounce back, let's just assume a lot of people are cashing out after they go, oh my God, I finally recovered there. Let's cash out. It doesn't impact the supply negatively because the demand's just that much stronger, right? These markets aren't chronically or heavily undersupplied just because of people not listing. They're heavily undersupplied because of the demand roaring, right?
When that many people have gotten in to buy, that's been a big part. Combine that with the listing levels being low. So even if there's a blip of people going cashing out, which no doubt's happening, a lot of the buying force that's coming in is just that much higher. It doesn't make a difference. And so that's one part, but I'd be surprised at how many people cash out because once you start seeing those gains, it's a train you want to ride, you know?
And this is evident with data that we're seeing across the nation with what we call hold periods. So check this out. In 2008, the hold periods across Australia in the six capital cities that we looked at, which was Adelaide, Brisbane, Canberra, Melbourne, Perth, Sydney, the data here shows that the average was ranging from, give you Adelaide, was around six years. Sydney, where's Sydney at? We'll look at the highest.
Melbourne was 8. 5 years. So you've got a six to 8. 5 years hold rate. Now, if we look at Adelaide, which is the bottom in 2008, it's six years, has now gone to 8.
- So you can see that hold period. And where we look at Melbourne, which was about an 8. 5, is now at about 11. 5.
So it's a lot of holding. So people have actually increased their hold periods, which is a big part of also why supply is having a crunch, because people used to hold it over a decade ago at six to eight years. Now they're holding it at 8. 5 to 12 years. And I think a big part of that is taxes.
When people have to sell and then rebuy again, they have those taxes to look at at higher price points. That's no fun. Yeah, people don't really, and you do go into this a lot, and people don't really talk about, they don't really think about the stamp duty on the way back in, but it's definitely something to consider. Like stamp duty is a significant amount of money that goes just to tax. Like it's straight to them.
So people are really, really worried about capital gains tax though. That is the one thing that is the most significant, depending on how long you've held the property, how well it's done. And that seems to be the biggest deterrent for people to be able to exit out of a property. They don't think too much about going back in to pay stamp duty, but they definitely think about the capital gains tax on the way out. Yeah, look, taxes all around, man.
Like taxes, I mean, you see a lot across the socials, right? People going hard on the comments going, tax these bloody investors, you know, tax them, chuck on this tax, remove that gearing tax, remove this. Anytime you play around with the system and you just stuff people up, like they have to hold it for longer to regain the gains. And that actually just kills supply a bit more. Like sure, you have blips where people might go, I'm not having any of those taxes, like land taxes and a few investors sell and things like that.
But overall, more and more taxes, more and more impact, they make someone hold it longer because they need more time to make that money back. And check this out, you'll love this stat, or you'll hate it, but you'll love realizing the problem, but you'll hate the stat. But 1986, median house price in Australia, $98,500. 2024, at the time of review, which was through the Property Council of Australia and Domains Insights, $1375 million. Now, stamp duty back then, $1,931, a whopping 1.
96%. Today's stamp duty, $58,034, which is cool. If the dollars go, they go up both sides, but it's the percentage of price, 4. 22%. So it's more than double, do you know what I mean?
As a percentage, like, yeah, the world gets more expensive over time. So don't get me wrong, being more expensive as a dollar, it is what it is. But to be more than double the percentage, that's an issue. And when you see that, that actual property to earnings, the index growth is just way apart. And so taxes like that, stamp duty, they kill mobility.
Imagine if stamp duty and CGT weren't a big focus or an issue. Yeah, well, that's what you mentioned in this white paper about that could be a potential cause of the established supply being so tight. So that pretty much is stamp duty and capital gains tax. Makes a whole lot of sense. Exit and entry costs, that's for the established market.
So let's go into the brand new market supply, because that's talking about a lot of different things, which is more government regulation and the challenges in actually releasing more land and having developments approved. So that's... Yeah, let's go into new supply, right? So firstly, to link the conversations between new and established supplies, there's a couple of things to look at. Established supply will ease the crisis.
Yes. You just can't come out of a crisis with new, right? And I'll give you an example. There are 10. 4 million dwellings in the country.
Maybe it's closer to 11 million now, but it's over 10. 4 million. And what do you think is going to move the dial the biggest? Someone building an extra 100,000 homes or someone listing a million properties? Do you know what I mean?
See, but that helps with... Wouldn't that help more with selling properties, like the actual price of the property? What about the rental market? How does that relate to the rental market? Yeah, so from the rental market, you've got two drivers, right?
One driver is going to be from a supply aspect, is how many investors are in the game. If investment activity continues to reduce, what ends up happening is that the buyer, so today's buyer, they win. A home buyer will get a place. Great. Nothing wrong with that at all.
We should celebrate that. But then people forget about others and they only think of themselves. It's just natural, right? And people can pretend to be like, I'm for the people, but you typically think of yourself. And I'll give you this example.
The renter today goes, less investors, I now bought my place. Yes. Are they the only renter forever? Or do more renters replace them as a renter? Yeah, yeah.
Kids grow up and they leave home. People get divorced and they leave home. People move out from living with relatives or parents. People move from overseas to Australia. People move between states.
People finish studying and they go to start renting. There's more people constantly fed into the rental pool. Now that pool's smaller because you've seen 30% of investors come down to 25, come down to 20. So every time that pool is smaller, there's more people competing for less stock. So that's one reason why established stock requires investors to be a part of the game because the government's proportion of public housing just isn't there.
So that's one element. The second element is the new build, right? When the new build comes up to an investor or another world, which is called build to rent. So it's like institutional, big, big dog, big player money, super funds, overseas funds coming in and going, let's build a monster unit block or unit towers, but let's all build it all for investing. Like everything straight rental properties in the areas people want to work, commute to, live, family, parks, all that sort of stuff.
Those are the two biggest ways to move that, right? The third one is also household size. If everyone like comes together and household size increases, that means also people sharing more homes together, people coming together, living with family again, people not moving out as quick. Let's just say all these things happen. That also creates more availability in the rental stock.
So those are things in the rental parts, but coming to your question on new builds as well. Number one, rising construction costs and labor shortages. So we touch on that in this report. Costs have come down heaps. So like they haven't come down, but they're rising way slower, right?
So they're rising really quickly, but they're rising much slower now. So that's a good news part, but labor costs have not. Labor shortage is still a big issue. Why do you think that is? Do you think the kids of these days, they don't want to do an apprenticeship, they can just make more money on TikTok or what's the go?
Man, I mean, look, side note, you know, like ABNs in Australia have been booming, like registrations for ABNs. So side note, this side hustle is pumping out everywhere. Uber, people doing the gig economy, all that stuff, like business registrations are popping off. So I think that's masking some data for sure, like unemployment data or people moving to, because they're not technically job searching, they're starting side stuff. But look, it's so many reasons, right?
Number one is skill doesn't happen overnight. Even if you're going to study through this studying, there's work experience and going. So there's that overseas migration that needs to play. And this is something as well, like controversial, people keep talking across Australia to say, hey, stop the migration. It's too crazy.
It's too high. We've got a crisis.
