Category: Industry

Why construction is going to ground

In a worrying statistic for the $360 billion construction industry, analysts report that up to a quarter of insolvencies are Australian companies within that industry.

“It’s a bit of a shocking statistic,” says Australian Constructors Association chief executive Jon Davies. “Particularly when you look at it in terms of the industry’s contribution to the economy (eight to 10 per cent of GDP) — it’s a disproportionately high level.

“At the moment you are hearing a lot of people talking about a ‘profitless boom’ and it has been a reality.

“But the bigger issue is not so much the profit margins. It’s the willingness of our industry to accept risks that they really aren’t able to quantify, and they really shouldn’t be trying to, from clients that are more than happy to try to pass those risks on to them.”

Major Australian companies such as Pindan Group and Hutchinson Builders are being hit hard with external administration or overheating issues.  

Hutchinson Builders chairman Scott Hutchinson summarises that “in 12 or 18 months, there’s likely to be a lot of builders going broke and most of them don’t know it yet. Then we’ll have a flight to balance sheets”.

Crisis point: the reasons

With home building at record highs, many suggest that a surge in building activity due to economic stimulus forced developers to act swiftly. 

They say policy announcements came without proper forethought about the implications and consequences, leading to the current construction supply shortages.

A range of factors has played a role, including rising shipping costs due to a shortage of empty containers because of COVID-19, rising labour costs, record-low interest rates and a national housing shortage. Building material defects and unprecedented demand for new housing stock across the country have also strongly contributed.

BIS Oxford Economics associate director Adrian Hart says that pressure on construction costs would emerge from 2022-2023 as the dollar of work done rises to unprecedented levels.

How to rebuild construction

With a national repair bill estimated in the vicinity of $6.2 billion, even before the COVID era, urgent reform is required to help ease construction back on track.

Failures would continue if governments don’t make great changes to the way construction is done in Australia, says CFMEU national secretary Dave Noonan.

“This national crisis in construction can only be resolved through close consultation with workers and the Construction Forestry Maritime, Mining and Energy Union will continue to play a constructive role in developing solutions for our industry,” Mr Noonan says.

“Now is the time to come together – not silence dissent.

“We’ll be producing detailed policy solutions and will work with the federal and state governments across Australia over the coming months.”

(Source: Urban Developer)

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How the pandemic and consumer behaviour affect the economy

The devastating socio-economic impact of the COVID-19 pandemic will be felt for years to come unless smart investments in economic, societal and climate resilience ensure a robust and sustainable recovery of the global economy, says the United Nations.

According to UN research, in 2020, the world economy shrank by 4.3 per cent, over two and a half times more than during the global financial crisis. 

The modest recovery of 4.7 per cent expected in 2021 would barely offset the losses of 2020, as reported in the World Economic Situation and Prospects.

The Journal of Risk and Financial Management also uncovers how coronavirus has manifested consumer panic buying, herd mentality, changing discretionary spending and the role of the media in influencing behaviour.

Furthermore, contagion effects are likely increased through greater international media communication and access. Hence, JRFM anticipates that the COVID-19 crisis will not only see an increase in consumer fear, but also the broader repercussions of this fear and uncertainty in spending decisions.

Safe as houses

The key factors affecting real estate prices and availability are record-low interest rates and government incentives offsetting economic uncertainty. This in turn drives up housing demand but reduces supply. 

The pandemic served to bolster the regional lifestyle exodus, which proved beneficial for local markets and industries. 

Real estate prices often follow the cycles of the economy, but investors can mitigate this risk by buying REITs (real estate investment trusts) or other diversified holdings that are either not tied to economic cycles or that can withstand downturns, says Investopedia.

Necessities prioritised

However, with 1.4 million Australians and a comparative number in New Zealand experiencing pandemic-related mortgage stress, discretionary spending has been altered by consumer priorities. 

According to JP Morgan research, the products people mostly bought during the pandemic include household cleaning items and personal hygiene products; hair dye; vitamins and supplements; and coffee. 

Double-digit product declines of 25 per cent or more were relegated to cosmetics and sun care. The prevailing work-from-home mindset and cancellation or postponement of travel plans put paid to the steep drops in these categories. 

JP Morgan’s Head of European Food, Home and Personal Care Research, Celine Pannuti, indicates that these declines are cyclical. “… Some categories will find it very hard short term. They should come back, but discretionary products more closely linked to the economic cycle will be more impacted because they are generally not must-haves,” Ms Pannuti says.

Quality trumps quantity

The economic downturn in household budgets has also honed a collective approach to investing in quality over quantity. This trend has been enhanced or prompted by the pandemic’s harsher fiscal realities.

People are left with less money in their pocket, says Ms Pannuti, so stretching your dollar further with long-lasting purchase decisions is mandatory.     

The rise in unemployment figures is also reinforcing stay-at-home trends. This will be reflected in spending patterns in the next 12 months or more. 

“We could see some downtrading as consumers settle for more affordable options,” Ms Pannuti says, “although for now, we have seen consumers buying big brands and choosing household names overvalue or private-label products.”

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In appreciation of depreciation

Simply put, depreciation is the act of a fixed asset losing value over time. It occurs in all acquired entities.

The nature of this ongoing prospect in terms of an investment property precludes depreciation solely for end-of-financial year prioritising.

Rather, a concerted financial planning approach and effort ensures that your investment and deprecation remain a cohesive unit.   

Fast facts

—Depreciation is not a tax-time issue – organise a depreciation schedule as soon as an investment property settles to gain immediate tax deductions.

—Use a depreciation schedule as a tool for calculating future costs and minimising them.

—Items valued below $300 can be written off immediately, while assets that have an opening value below $1,000 in the year of acquisition can be added to a low-value pool.

The art of anticipation 

Industry leaders, such as the Executive Chairman of Raine & Horne, Angus Raine, offer sound depreciation advice: “As soon as you settle on a property that you plan to use for investment purposes, seek out the advice of a depreciation specialist such as a quantity surveyor, who can use their knowledge of depreciation legislation to maximise deductions for partial-year periods as well.”

Mr Raine adds that the depreciation potential of a property is often a factor in an investor’s decision to acquire a rental property.

“A depreciation estimate obtained prior to purchase can help investors when budgeting for their new investment. This is because the deductions for wear and tear can assist with minimising the costs involved in owning an investment property,” Mr Raine says.

Act fast to capitalise on potential

Quantity surveying firm BMT Tax Depreciation suggests that investors take swift action.  According to BMT’s research, even if an investment property is owned for just 20 days, an investor could potentially claim around $3,834 in deductions in the first financial year alone.

The Chief Executive Officer of BMT, Bradley Beer, says deprecation specialists will utilise the latest methods of calculating the wear and tear on a property, regardless of how long it’s been owned and rented.

“A comprehensive depreciation schedule will incorporate methods such as immediate write-off and low-value pooling to maximise deductions for a shorter period of ownership,” says Mr Beer.

“By requesting a depreciation schedule as soon as a property settlement is finalised, investors can recoup some of the costs and provide an immediate boost to their cash flow,” he adds.

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Real Estate Insight Expert Opinion with Peter Aloupis, Green St Property CEO and Licensee

Industry Insiders: A column featuring the experience and opinions of leading industry proponents brought to you by The Real Estate Voice.

Peter Aloupis

Company: Green St Property
Job title: CEO and Licensee 

What attracted you to the real estate industry (and when)?

I have always been attracted to the idea of sales and the concept of real estate (and) becoming a real estate agent was a natural progression. As a kid, my parents always taught me the value of investing in property for the future and this industry has always offered the challenge I personally enjoy. I started in real estate in my early 20s and am approaching 27 years in the industry. In fact, this year marks 20 years of operating my own agency. Everything about this job makes me “tick” — negotiating deals, the people you get to know along the way, the trust people give you to sell their investments — it’s an amazing industry to work in if you are passionate about it. 

What do you love most about the industry?

This industry forces you to think on your toes, and there’s plenty of room and freedom to think of new and exciting ways to sell real estate. What do I like the most? I love the excitement I feel when I get the opportunity to sell something unique. Not every listing is a beautiful, historic landmark — but when you get the opportunity to put your name behind something that has prestige and presence, that’s exciting. Working in Newcastle, I have had a unique opportunity to consistently sell real estate that is embedded with personal stories — it’s exciting to be able to tell your team: “I grew up in this street and now I get to sell my old next-door neighbour’s house 20 years later”. 

What do you consider your proudest moment or greatest achievement (in the industry)? 

When I reflect on my career, I have so many proud moments. The first home I sold, earning suburb records, negotiating difficult deals — I could go on forever. However, the thing I am most proud of has been establishing a successful long-running agency within the Newcastle region that allows me to work alongside my wife, Amanda. The business has certainly seen challenges over the years, but I’m so proud to see the way we have handled any obstacle that has come our way. We have seen natural disasters, office changes and now a pandemic — and we are still standing strong.

Biggest challenges in the industry? How has the pandemic affected the way people buy, sell and rent property?

The pandemic has affected us greatly here in Newcastle — the market is hot! We found when the pandemic hit and the world began adjusting to new ways of living, this essentially forced people to audit their living situations. People no longer needed to be confined to the traditional idea of working in an office. They were discovering a lot more flexibility to their careers by working from home and, as such, we saw an influx of buyers coming from Sydney to Newcastle to purchase homes closer to the beach that were traditionally cheaper. The interest has been great for us. As a boutique agency, we have the flexibility to include our “personal touch” in the way we do things. We were the first in our area to develop pre-recorded virtual inspections, but with a custom twist. If we had buyers overseas, we could still show them homes through a medium that was personalised for them. Other agencies soon followed suit. This process is now embedded in our leasing department and we have found it has streamlined our entire approach to the way we operate in-house. 

Latest real estate/economic trends affecting your state or region?

It’s a sellers’ market! Industry-wise, we are seeing street records and suburb records being broken on a weekly basis (some by us), which is really exciting. We are seeing growth in developments and huge interest/demand in large, family-sized homes. Apartments are still generating a lot of interest as investments, especially within our CBD. 

How would you improve the process and incentives for property ownership, from an owner-occupier and investment perspective?

I have a passion for fair and equitable planning. Specifically, I have been working on a detailed plan for first-home buyers to enter the market, which relieves government of inconsistent offering of stamp duty, home builder incentives and cash splashing, while replacing this with an educated savings plan through superannuation savings and incentives. This plan can also be tailored and considered for investors who want to take back control to a hands-on investing approach and not leave their superannuation in the hands of superannuation funds. We know that when investments are managed privately, we have the potential for greater returns and flexibility. This is an area that I would love to see developed.

What’s the biggest misconception people have when buying or building a home?

I think the biggest misconception people have when buying or building a home is how easy it looks on the surface. We live in an age where we are flooded with TV shows that portray “buying and flipping homes” as an easy option with a large financial reward. People never talk about the red tape involved; the council approval, the logistics of going about doing that, the stress, the taxes and the costs. Don’t get me wrong; it can be fun, but it’s definitely not all roses — and it’s something you have to be smart about. We pride ourselves on transparency, so we educate buyers on what would be involved if that is a path they decide to take when buying or building. 

What tips would you give for future-proofing an investment?

COVID has shifted ideas of investing and, prior to this, our company has been ahead of the change. Investing is about attracting and placing your investment in an area that attracts multifaceted incomes that can ride out the changes in the market. This investing relies on dual income streams. An example is a residential income with commercial opportunities or a property that has a granny flat, which can be sublet. In terms of ongoing management, it is so important to conduct regular and thorough property inspections. These detect faults before they contribute to a reduction in the value of your investment. Stay on top of pest inspections to reduce possible structural issues and consider investing in landlord insurance. The adage “you need to invest to invest” to look after investment should amplify your returns.

What should prospective buyers look for when choosing a property?

It depends on the reasons for purchase. If buyers are seeking a solid investment, you want something that will retain/grow in value — look for minimal damage, a house located on a corner block is always great and something that doesn’t require a lot of money for renovations is also ideal. If you are looking for that “forever home”, it really boils down to finding a configuration that’s right for you — if you can see yourself in that home happily for the long term, then it’s for you!

In terms of technology and interaction, what do you think buying a home will be like in 2030?

The future is exciting! I think we will see a huge change in the way we showcase housing by 2030 — we already have. We might be doing pre-recorded tours now to minimise contact, but who knows? By 2030, we may be stepping into a virtual reality world where we can physically immerse ourselves in the houses we are selling/leasing. I think social media will play a huge part in the way we advertise; it’s just so much more accessible to the public. In saying that, fingers crossed by the time 2030 hits and I’m in my 50s, I will still be managing the traditional methods of looking after people. Not just letterbox drops, but the opportunity to say “hello” to the people in my city via sporting club meetings, commercial gatherings, etc. — it’s a great part of this job.

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‘FOMO’ meets its match in market driver ‘TINA’

Record-low interest rates and surging property prices in Australia have fuelled buyers’ fear of missing out, otherwise known as FOMO, since the pandemic was declared in March 2020.

But with the cost of renting closing in on that of standard mortgage repayments and demand for housing stock continuing to outstrip supply, TINA (there is no alternative) is fast becoming an equally motivating factor.

CoreLogic says average house values have increased 10.7 per cent in the year to date.  

And with Big 4 bank forecasts tipping further house price increases of up to 20 per cent over the next two years, the lure of property ownership is proving too tempting to many.

Buyer profile changing

First-home buyers have been integral to the FOMO phenomenon, with ABS statistics for the December quarter showing this demographic at their highest rate of owner-occupier loans since June 2009 (about a third of all owner-occupier loans).   

But CoreLogic says the influence of first-home buyers has decreased over the three months to April, coinciding with the end of the HomeBuilder government grant in March.

Consequently, the buyer profile has shifted to existing owner-occupiers (downsizers, upsizers and those moving), who accounted for 52 per cent, first-time buyers (21 per cent) and investors (25.9 per cent), which is increasing but still well below the decade average of 35.3 per cent.

CoreLogic says the tree change of buyers chasing more affordable properties in regional areas is coupled with a desire for more living spaces and better internet connectivity as the working-from-home trend takes hold on a more permanent basis.  

Investment was particularly strong in New South Wales and Queensland.

Appetite for risk

The number of low-deposit mortgages had been on the rise in 2020, adding to the volatile mix.

The proportion of mortgages taken with a loan-to-value ratio (LVR) higher than 80 per cent recorded its highest increase in 13 years in the December quarter.

But CoreLogic says the portion of new loans with an LVR of greater than or equal to 90 per cent fell from 11.3 per cent to 10.4 per cent in the past quarter.

The Australian Prudential Regulation Authority (APRA) quantifies ‘risky’ loans as those having a debt-to-income ratio greater than six.

This enhances the ever-present danger of negative equity – when a property’s value falls below the amount owed – should the lending environment or employment prospects unexpectedly change.

Affordability hard to ignore

With interest rates already at historic lows, the Reserve Bank of Australia has consistently stated it does not expect interest rates to rise before 2024.

The Reserve Bank’s official cash rate remains at the historically low 0.1 per cent, which means many fixed-rate mortgages are available for substantially less than three per cent. Variable rates are available in the same range. 

Given the optimal conditions, it makes sense for property owners to factor in future rises by creating an emergency fund for at least three months of expenses or paying more than the minimum repayment, to reduce the length of your loan in the long term.

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The pressures driving regional property growth

Affordability and remote accessibility are two main motivators for the exponential growth in regional real estate. 

COVID-19 played a key role in the initial push towards urban fringe or regional lifestyles. This was enhanced by remote work opportunities that were emphasised by pandemic-led realities.

Yet even prior to the pandemic, it’s a common misnomer to believe that housing prices have always been more affordable in regions than they are in capital cities.

Reporting on the supply and demand of regional housing a decade ago, the Australian Housing and Urban Research Institute says earlier research indicates equal or higher property values than some urban markets, at least in regional hotspots and potential rural areas.

“House price movements since the year 2000 have affected some regions more than others, with amenity-rich ‘sea-change’ or ‘tree-change’ localities especially affected by rising house prices,” the March 2011 report says. 

Further research shows that uncertain supply processes for the rental market in rural centres have also contributed to the high degree of unaffordability in housing. 

Pandemic-inspired growth factors

Although COVID-19 challenged many local industries, the pandemic proved to be a major boon for the regional sector. 

Federal government stimulus in 2020, such as the First Home Owner Grant and HomeBuilder Grant, earlier-than-expected downsizing investment and regional construction spikes including build-to-rent and social housing developments, led the charge.  

The government-motivated regional building boom, including an increase in lower-residential construction activity contrasting with reduced levels of high-density construction, is confirmed in economic forecasts by the Reserve Bank of Australia.

Equally, the widespread rental affordability crisis and dwindling housing supplies in prime regions fuelled heightened market uncertainty. This created a spectre of FOMO (fear of missing out) among potential home buyers.

With affordability levels at an all-time high, an upsurge in non-bank lending, such as line-of-credit and refinancing home loans and the omnipresent Bank of Mum and Dad, ensued.

How to capitalise on regional centres

Research and timing hold the key to securing top-performing properties in smaller regions.  

Industry analysts say population growth and infrastructure development alone do not determine the full worth of affordable investment opportunities.

New transport networks, especially airports, and hospital construction are obvious drawcards in lesser-known regions. 

But investors should also look for next-level or untapped areas whose markets indicate growth in median household income that surpasses inflation. 

Similarly, burgeoning local economies are evident in the volume of new businesses, which inspires investor confidence and encourages spending.

Real estate experts also suggest that statistical data, such as auction clearance rates, vendor discounts, vacancy rates and rental yields, offer keen insight into value-adding for an entry point into regions with investment potential.  

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Real Estate Insight Expert Opinion with Leanne Pilkington

Industry Insiders: A column featuring the experience and opinions of leading industry proponents brought to you by The Real Estate Voice.

Leanne Pilkington

Company or organisation: Laing+Simmons Corporation / Real Estate Institute NSW
Job title: CEO and Director / President

What attracted you to the real estate industry (and when)?

I started answering the phone in my Dad’s agency as a 12-year-old and moved into it full time after I finished school. I never really wanted to be an agent and studied to become a valuer, thinking that was my career path. But, ultimately, sales was my future.

What do you love most about the industry?

I love the people; real estate agents are just good people (at least the majority are). I also love dealing with small businesses. The business owners work hard; they know how to have fun; and are grateful for all the help we give them to achieve their individual business goals.

What do you consider your proudest moment or greatest achievement (in the industry)? 

Buying into Laing+Simmons after working there for 25 years, and being the only person ever voted REINSW President twice.

Biggest challenges in the industry? How has the pandemic affected the way people buy, sell and rent property?

Finding good people is an ongoing challenge for every business, and real estate is no different.

People’s real estate decisions have been profoundly impacted by the fact that many of us are able to work from home. This includes different styles of property in locations that were previously desirable, but not viable.

Latest real estate/economic trends affecting your state or region?

The majority of areas in NSW are suffering from low levels of availability of rental properties, and although the sales market has seen more properties being listed, we are starting to see a levelling out of demand. We are still seeing strong prices and high clearance rates.

How would you improve the process and incentives for property ownership, from an owner-occupier and investment perspective?

I would like to see some stamp duty incentives for downsizers – there are a lot of people living in large properties that no longer serve them. Some incentives would see those family homes hit the market, which would be good for everyone.

What’s the biggest misconception people have when buying or building a home?

That you will find something that’s absolutely perfect and will tick all of your boxes. Usually, we have to find areas of compromise.

What tips would you give for future-proofing an investment?

Use a good real estate agent and take their advice when it comes to handling repairs and upgrades. Make sure you look at refinancing regularly and check the yields you are achieving. Spend the time developing an investment plan and clarify what you are trying to achieve from your property investments.

What should prospective buyers look for when choosing a property?

Be clear on what your non-negotiables are and where you are prepared to compromise. Make sure you do your research thoroughly and visit the property at different times of the day and different days of the week to ensure you are not surprised by traffic, or flight paths and the like. Make sure you get a pest and building inspection from a reputable company.

In terms of technology and interaction, what do you think buying a home will be like in 2030?

I think properties will start to find us, in that the platforms will start offering properties that will potentially suit us as soon as we even just think about moving! Agents will still need to be part of the transaction, although agents that refuse to implement technology will be replaced by those that do.

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Bank of Mum and Dad chips into affordability crisis

Surging property prices that are fuelling the national and multinational housing affordability crisis are leading many first-time homebuyers to a trusted financial source: The Bank of Mum and Dad.

Concerns that parental financial assistance is contributing to record house prices are not unfounded. Analysts note that in the March quarter, 60 per cent of first-home buyers received substantial financial assistance from Mum and Dad. 

And it’s no surprise that more parents are taking advantage of record-low interest rates to refinance their properties and help their adult children onto the housing ladder amid skyrocketing house values.

Digital Finance Analytics estimates the number of Australians getting help from their parents has continued to rise for first-home buyers in the past decade. 

DFA suggests that the Bank of Mum and Dad has become the country’s ninth biggest lender, behind Suncorp. 

Traditionally, Australia’s housing rally has favoured baby boomers and locked out youth, compounding an intergenerational shift of wealth. 

Government stimulus, such as the First Home Buyer Grant and HomeBuilder Grant, has assisted to a small degree, but the bigger financial picture looms large.

Bank loan numbers on the decline

But as the number of bank loans to first-time buyers dwindles, the average slice of cash handed to them by parents has almost quadrupled in the past six years or more, DFA says.

Mortgage brokers are also reporting that the number of first-home buyer clients receiving help from their parents has more than doubled in the past three years.

The economic downside: a market that the Reserve Bank of Australia is already wary of may be further inflated.

Research found that more than two-thirds of owners who refinanced their houses helped their kids. The average handout is about $90,000, with many parents wishing they could provide more.  

First-time buyers are “being infected by the notion that property is about wealth building, rather than somewhere to live,” said Martin North, Principal at DFA. That “may be tested if interest rates rise later, or property prices fall from their current illogical stratospheric levels.”

The solution?

Analysts suggest that balance holds the key to solving the housing affordability crisis and keeping the economy in the pink. 

Responsible lending, financial assistance, increased housing supply and regulations that realistically encourage homeownership from a young age are the sought-after variables across all market sectors. 

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Real Estate Insight Expert Opinion with Adrian Kelly, REIA President


A new column in The Real Estate Voice, featuring the experience and opinions of leading industry proponents. 

Adrian Kelly

Company or organisation: REIA
Job title: President

What attracted you to the real estate industry (and when)?

I was 19 when I joined the real estate industry and what attracted me to it was that it wasn’t a 9-to-5 desk job. It involved people — and real estate is not so much about the houses, it’s about the people. 

What do you love most about the industry?

It’s very much the people involved in the industry and the fact that every day is different.

What do you consider your proudest moment or greatest achievement (in the industry)? 

I’ve been fortunate. I’ve had two proud moments/achievements. The first was when I became President of the Real Estate Institute of Tasmania. The second is becoming the President of the national body (REIA) and I’ve been doing that since 2019. 

Biggest challenges in the industry? How has the pandemic affected the way people buy, sell and rent property?

Last year was a challenge, obviously, for two main reasons. The first was we had new legislation come into place around tenants. That legislation was entirely understandable because, regardless of whether the pandemic had taken hold, everyone in Australia needs somewhere to live. Thankfully, it looks as though we’ve weathered the storm. The other thing driving the legislation was states that went into prolonged lockdown, especially in Victoria. That created issues, not just in real estate, but in every industry.

Latest real estate/economic trends affecting the nation?

What we’re experiencing, and this is almost right across Australia, is what was being forecast 12 months ago. We were talking value reductions or price drops of 20 to 30 per cent, and that hasn’t happened — in fact, prices are going the other way. But our biggest problem is something to buy; not just for property owners, but also for tenants. The pandemic has forced a lot of people to bite the bullet and move to the regions, which is what they’ve always wanted to do. We just haven’t been building enough homes, particularly in regional parts of Australia. So, that’s creating challenges for some local markets and tenants due to steadily rising rents. 

How would you improve the process and incentives for property ownership, from an owner-occupier and investment perspective?

We don’t have a national housing plan and you can’t come up with solutions in one term of government. I’d like to see a national housing plan to get us through the next two decades. The plan could include local government, land supply and how to make it easier for people to build homes. It’s certainly on our radar and is something we’ve been discussing with the Federal Government and Opposition. I think we’re going to have to get the next federal election out of the way and then we can have a proper conversation about it. It is needed, because real estate is very reactive at the moment. 

What’s the biggest misconception people have when buying or building a home?

I think the biggest issue having an impact on our market is that there’s an awful lot of people living in big family homes who aren’t going to market, because they feel it will be too difficult to buy something at the other end. This is exacerbating our supply problem. And, again, it gets back to our national housing plan because unless we improve supply, prices are just going to continue to rise and many potential purchasers will continue to be disappointed. 

What tips would you give for future-proofing an investment?

In terms of an investment property with a view to being tenanted, I would always buy in a suburb where there’s reasonable population growth. In terms of a property to live in, I think upkeep and maintenance should be top of the list.

What should prospective buyers look for when choosing a property?

At the moment, there are so many buyers missing out on properties, even in Tasmania [where Mr Kelly was “born and bred”, and is based]. In the old days, we had one happy seller and one happy buyer — and life’s great!

Nowadays, we have one happy seller, one happy buyer and probably 20 disappointed potential purchasers. Many of those people have probably missed out on five to 10 properties.

If I were doing the rounds, intending to buy property, I would be attending every single auction that I could on the weekend before to get a real idea of what prices are doing. The other tip would be: don’t be afraid to buy in an area that’s a couple of suburbs out of where you want to be. It’s called the property ladder, isn’t it? Just jump on at the bottom and off you go.

In terms of technology and business interaction, what do you think buying a home will be like in 2030?

The good thing about the pandemic is that it forced a lot of us to move swiftly to technology that was available, but we weren’t using. This includes auction platforms and virtual inspections. I think over the next 10 years, all of that technology will become cheaper and more widely available. But I think the human interaction will remain, because that’s the one thing that technology can’t take out of a real estate transaction. 

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Buyer sentiment downcast amid rosy property outlook

Affordability and supply issues appear to be dampening the mood of Australian homebuyers, according to findings from ME Bank’s latest Quarterly Property Sentiment Report.

Conducted in April 2021, the report perceives the overall sentiment of buyers and sellers in the residential property market dipping seven percentage points to 42 per cent in the past three months. This follows record-high sentiment during the first quarter of 2021, which was conducted during the economic highs of the post-pandemic lockdown phase.

Other key report findings

Among buyer groups, first-home buyers recorded the lowest level of positive sentiment this quarter, down three percentage points to 24 per cent, while investors recorded the highest at 52 per cent.

Contributing to a decrease in positive sentiment this quarter is a fall in the perceived availability of residential property. Overall, 60 per cent of survey respondents believe there “isn’t enough choice in the current residential property market” − a 17 percentage point increase since January.

Overall, 91 per cent of survey respondents said “housing affordability is a big issue in Australia” — rising to 93 per cent among first-home buyers.

Around 67 per cent of those in the residential property market are “expecting prices to increase in their area during the next 12 months” — a 13 percentage-point rise since January.

An overwhelming 82 per cent of the property buyers surveyed said they “feel worried about paying too much for property in the current market”.

Hopeful glimmer

However, property owners’ “sense of wealth” and “general financial confidence” increased to the highest levels since ME’s survey began in April 2019.

Investors appear to be looking to cash in on high prices, with 23 per cent indicating they want to sell their property in the next 12 months, compared with only 11 per cent of owner occupiers.

By location, Sydneysiders are more likely to buy (38 per cent) and sell (13 per cent) in the next 12 months than Victorians (32 per cent and 10 per cent, respectively) and those in other states.

ME’s findings revealed more than half (58 per cent) of those looking to buy “feel a sense of FOMO (fear of missing out)” when buying property in the current market.

Trans-Tasman perceptions

On a similar footing, while housing confidence in New Zealand is at a 25-year high, buyer sentiment has soured as properties become increasingly unaffordable, Auckland Savings Bank research found.  

With average house prices estimated at eight times the average household income, the latest quarterly ASB Housing Confidence Survey reveals 73 per cent of respondents expect house prices to rise. This compares with expectations of 45 per cent of respondents in the previous survey in July last year.  

Buyer sentiment contrasts starkly with houses being sold in numbers not seen in 15 years.

With prices not expected to fall, restoring market balance is high on the regulation agenda. The Reserve Bank of New Zealand has reintroduced loan-to-value ratios and requested another tool from the government in debt-to-income ratios.   

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