Manage episode 287662827 series 1537109
There is no doubt that our property markets are in a broad-based boom, with almost all segments, other than the inner-city apartment market showing strong property price growth.
And the media is having a field day whipping up a frenzy of emotions with headlines causing some buyers to worry that the housing market is running away from them.
In fact, FOMO (fear of missing out) seems to be a common theme around Australia's property markets.
But the general media and certain commentators on social media are worrying home buyers and investors by speculating that interest rates are about to rise or that unemployment will escalate to 8% when JobKeeper ends, or that everybody is moving to the country and city property values will be affected.
So in today’s show, I want to bust some property myths in two segments.
You probably know that I host a regular weekly Property Insiders video on my YouTube channel where Dr. Andrew Wilson gives sensible, down to earth commentary about what’s happening in the property market, and the audio recording of last week’s video will be the main feature of today’s show but first I’d like to bust some of the media myths about regional Australia’s property markets, who’s moving there and whether you should consider investing in regional Australia.
The Regional Australia Myth
I’d like to start by discussing the myth being promoted in the media that investing in regional Australia is a great idea.
First, that’s a silly comment – there are so many different regional markets, as you know I don’t suggest investing in the Sydney property market or the Brisbane property market because even within capital cities there are many different markets divided by geography, price point, and type of dwelling.
So, therefore, just suggesting investing in regional Australia makes little sense.
Then there’s the argument that some put in the media that this particular town in regional Australia has performed better than the Sydney property market.
Again, that’s a silly comparison, because the regional town may have 5, 10- 20,000 people in it and Sydney has 5 million people in it.
A better comparison would be the long-term performance of a particular regional town against a high-performing capital city suburb.
When it comes to investing, you shouldn’t be considering how you want to live, you should be investing in numbers, stats, demographics, and evidence and that’s what I’m going to share with you in a moment.
What about migrants?
We know that prior to the Covid pandemic and Australia shutting its borders, the population was growing faster than almost every other developed country and more than half our population growth of almost 400,000 people each year was coming from immigration.
Property commentator Michael Matusik wrote a recent blog discussing the myths about regional population growth.
Now there is no doubt that there is a small cohort of people who now want to live in regional towns within commuting distance of big capital cities because they have found they can work from home either part-time or full time, but Michael Matusik asks, “Is this what has been driving our regional property markets?”
Matusik suggests that the real reason why the regions have seen an increase in net internal migration over the last 12 months is because people who would normally have moved from the regions to the capital cities are (for now) staying put.
And the ABS statistics suggest that this is true.
Net internal migration to the regions was 36,500 last year, which was up 14,000 or 62% on the year before.
Now that sounds impressive, doesn’t it?
But you know how you can make numbers lie and twist them to make your point?
You see… net migration is worked out by comparing those that move into an area against those that leave the same place during the same time frame.
Firstly, that the overall level of arrivals to, and departures from, regional Australia has fallen over the last 12 months. This is because there are no overseas migrants arriving in Australia. This impacts both the capital cities and regional Australia.
Secondly, the ABS statistics show that there has been little change in the number of people moving from the capital cities to the regions, whilst on the other hand, there has been a big increase in the number of regional residents who haven’t moved.
This trend increased during 2020 as certain Australian States implemented increasingly strict covid-related lockdowns and other restrictions.
Around 70% of Australians live in our six main cities. I don’t think this will change because of the pandemic.
In short, the capital cities are where the jobs and the services that people want are located. The majority of high-paying jobs that are going to be created are going to remain in capital cities.
Many regional residents have put their move to the capital cities on hold last year, and as a result, I believe we will see a big snapback to positive net migration to the capitals once the covid vaccines roll out and travel-related restrictions cease.
Unless major money is spent on regional infrastructure and this amount rivals the amounts being spent in the capitals, any population movement to regional Australia will be modest at best.
Matusik puts it well:
“Despite recent weasel words suggesting otherwise the decision-makers must think this too.
Ask yourself, if we were truly going to see a regional resurgence, then why is almost all the existing, and proposed, infrastructure projects focused on the major capitals and mainly in the inner-city areas within those cities.”
if your investment budget is limited, and that may mean you can only buy one to three or four investments in your lifetime – you need to buy high growth properties in areas where the demographics will be able to afford to pay more in the long term pay more to buy properties and pay more to rent your property – don’t fight the big trends.
Some of the Topics Discussed in My Chat with Dr. Andrew Wilson:
- The housing markets are surging
- Rental markets have been fragmented, with a disparity between house markets and unit markets
- Rental growth is continuing for houses, but on the slide for units
- Business investments have been coming back
- The government quickly pulled the country out of the recession that it purposely caused
- There has been strong growth in job ads, signaling that unemployment could fall quickly
Links and Resources:
Read Michael Matusik’s blog mentioned in the show here
Join us at Wealth Retreat 2021 on the Gold Coast in June – learn more here
Shownotes plus more here: Busting media property myths with Dr. Andrew Wilson
Some of our favorite quotes from the show:
“Don’t believe this media myth that investing in regional Australia is the right thing to do.” – Michael Yardney
“It’s unlikely that those inner CBD high rise towers will start filling up until our international borders are open, students come back, Airbnb comes into the market.” – Michael Yardney
“The problem is that people are listening to those “experts” on YouTube and “experts” on Facebook and they’re being a bit worried by them.” – Michael Yardney
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