MARKET UPDATE OCTOBER 2018
ScoMo maiden speech and migration means $2 billion Growth for Custodians.
When we add up the prices paid for all Custodian properties and what they’re worth now, the capital growth is over $1.2 billion today. But the two changes I focused on in the Game Changer webinar this month will see us hit $2 billion in this cycle.
The two big changes in the market that I have never seen before:
- 80m2 lots in all capital cities
- Immigration law changes
The new PM’s maiden speech
Scott Morrison’s maiden speech in parliament was music to my ears. What he said was: “every Australian is entitled to an affordable, comfortable home”. What I heard was what I said 20 years ago when I first wrote 7 Steps to Wealth; “there’s a friggin’ goldmine in your backyard.”
You see, we could fix the affordability problem at the stroke of a pen. The solution is density, and me says - it's coming.
I often say to people if you want to know about real estate, ask how much your mum and dad paid for their house and land, then ask grandma and grandpa how much they paid for theirs and work out what it’s worth now.
My mum and dad bought their first house in 1966 for $8,900 in Rodney St, Moorabbin, Melbourne. It was a 749m2 block and the house was 150m2, with 1 bathroom plus a garage. With mum, dad and 3 boys it was tight, but when my twin sisters came along it was real cosy. As a solution dad bought a 1,049m2 block of land in Brighton for $25,000 and built a 271m2 house with 5 bedrooms and 2.5 bathrooms plus a double lock up garage for $45,000 in 1971.
Tragedy struck as dad was killed in a car accident while the Brighton house was half completed. Mum did a very brave thing in finishing the house and moving us in, despite her accountant telling her to sell and retreat.
The Moorabbin house has a current estimated value of $1.35 million. You will find that no other asset class can beat that over 50 years.
‘But wait there’s more..!’
The current house takes up less than 30% of site coverage and if ScoMo is fair dinkum about ‘affordable comfortable’, then the backyard (or 300m2 of the block) is worth a cool $600,000 or $2,000 per m2 given 100m2 lots are selling now for $1,500 per m2 – located 50km’s from the CBD.
The Brighton house is even better with at least 500m2 available for ‘affordable comfortable’ and may mean the backyard is worth $1 million. And the house on the remaining 500m2 would be worth over $2.5 million.
You can’t show me any asset class in Australia that outperforms urban residential land (other than farmland on fringe urban that has been converted to urban residential).
Bluntly put, our affordability is broken because our homes are BIG and our land use is inefficient.
Australia’s house prices are often compared with other capital cities around the world so let’s break down the numbers. The average UK resident lives in a 36m2 house, Denmark 45m2, Ireland 29m2 and France 45m2. If you live in China and other parts of Asia it’s as low as 22m2. In Australia, we live in 100m2 of house per person, and our average lot size today is over 400m2. When I was growing up, the average lot size was 800m2-1,000m2 (the old quarter acre), and interestingly back then the house size was 160m2 with 3.4 persons or 47m2 per person. “Comfortable and affordable”.
When I wrote the first edition of 7 Steps to Wealth in 1998 I said everyone should buy the big blocks and wait, because density is improving. Back then we were buying land for $66 per m2; it’s now worth circa $700 per m2 (depending on the council density zoning).
So how does ScoMo fix the affordability problem with 1 stroke of a pen? Simple. force every council to rezone all blocks of land within 2kms of a railway station into 1 house per 80m2.
And I can show you a crankin’ good 3 storey house on 80m2 with ground kitchen living, 3 bedrooms, 2 bathrooms and a top level sunroom with half open BBQ deck. They sell them in Orange County, Los Angeles for around $1 million but I’m sure we could do better. That’s the bells and whistles; the affordable version is a 2 storey 160m2 house which would sell for $350,000- $390,000 today, with land at $2,000 per m2. “Affordable and comfortable”.
If you go on our Game Changer webinar you will see the 3 storey house on 80m2.
Immigration changes: ScoMo to set SEQ on fire!
Mr. Morrison is going to change immigration laws, which is going to see house prices double!
He will introduce a package that will see all new overseas migrants and foreign students redirected out of Sydney and Melbourne, sending them elsewhere.
Elsewhere is SEQ/Perth/Adelaide. Over two thirds of migrants move to Sydney and Melbourne, which was 160,000 people in 2017. If you take these two out of the equation, SEQ would see its population growth increase by 100%, every year.
Brace yourselves, change is coming! For more details on this, log into the Game Changer webinar.
And finally on our GAME CHANGER WEBINAR some real interesting answers by Custodians to our questions, here are the top 5;
75% are teaching their kids how to build wealth
21% are building wealth with their kids
70% support a 40 million population of Australia by 2050
83% of clients want to start a joint venture to build a property portfolio with their kids
21% signed up to do a Kokoda 48km or 96km overnight walk next July.
Intrigued? Learn more on Game Changer webinar – click here