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Off & Racing

 

A house in my area (SEQ) recently sold in 3 days for nearly 50% higher than its estimated value, and 20% higher than its last sale from 2 years ago. This isn’t isolated. Agents all over in Melbourne, Sydney, and other capitals are having similar experiences - but SEQ is particularly hot.

 

And so it should be, as it is well overdue. I expect this market to jump 50% by the end of 2022. All key markets have now come back to positive growth and I expect solid gains. If you’re going to duplicate, do it now as by 2020 you will definitely pay more.

 

The perfect storm has led to these unprecedented conditions. It’s all in the numbers:

  1. Australia is returning to surplus. We will report our first current account surplus since 1975! Mining production is underpinning strong revenues that other countries are envious of. It’s a golden era for us.  

  2. Record growth in population, jobs and infrastructure spend. Last year a 404,000 increase in population, mostly to capital cities. We created 230,100 jobs and replaced nearly 300,000 Australians who retired. SEQ’s infrastructure spend is up $10bn.

  3. Tax cuts. At last we have a government who has the numbers in the upper and lower house to deliver change. Tax cuts this year and next sailed through. 

  4. Banks are back lending after a near 2-year hiatus by APRA requiring servicing calculated at 7.25% interest rates. That was abolished in July. 

  5. Cash rate is at 1.00% and with sentiment it will drop further. Reserve Bank Governor says ‘get used to dirt cheap money' in relation to interest rates. Wow. 

  6. Retirees desperate for yield are driving equities to record highs, and real estate to follow and it should. Retirees will get less than 2% in the bank with no growth, yet they can buy residential property, which is returning at least 4% and as high as 6% (with dual occupancy). All before they get capital gain.

  7. Auction clearance rates in the main capitals have shot straight back to almost 80%. Stunning turnaround.

  8. First Home Buyers are back in the market, with 10,000 of them receiving 5% of their deposit paid by the government.

Stock on the market is very low, and with the banks not lending for so long, the approvals and future supply is very tight.

 

It’s a very good time to own property. And it’s a better time to own lots of property. Or more particularly land.

 

A point on valuations - recently we have had a number of clients asking agents about the values of their properties. The agents however haven’t been doing their homework, and are undervaluing the properties by as much as $130,000! Talk to your Investloan broker or Custodian client manager, who will provide you with the value AND the evidence.

 

Custodian celebrates 21 years this year. Clients originally bought land for $66/m2. That land is now worth over $750/m2. Sydney land sells for $1,250/m2 and higher density sites regularly sell for $20,000/m2

 

If you have borrowing capacity increase your land bank today. That’s my message.