Four experts provide their insights on what Australians can expect from Australian property in 2024 and the years that follow.
KnowHow’s Bushy Martin joined Eddie ‘the Frenchman’, Kevin Turner and Rasti Vaibhav for a live discussion on The Property Hub Collective Facebook group to provide insight into Australian property in 2024, including property prices, cash flow affordability, location and building versus buying.
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Will Australians see continued growth in property?
Bushy discussed the likelihood of the property market continuing to grow due to limited supply, shrinking household sizes and the current state of the construction industry.
“There’s not a year that goes by when I don’t hear people say our prices can’t continue to go up, this is never going to happen. It’s going to fall through the floor. But time and time again, we’ve been proved wrong and and the fundamentals are still there. It doesn’t change. Yes, we go through cycles and we expect highs and lows and periods where it’s pretty flat. But the reality is, from where I sit, given the very simple supply demand and sentiment indicators, we are going to see continued growth in property,” Bushy said.
“We’ll see it because particularly in the short to medium term, we’ve got very limited supply and we’ve got shrinking household sizes. Just the decrease in household size in recent years has put a 40% increase on the number of houses required just to satisfy the existing population. We’ve had 620,000 skilled migrants come into the country the last year, and that level of migration, while it will dial back a bit, is going to be maintained at a reasonably high level. And then we’ve got a construction industry that’s in strife and will be for a while yet, so we’re way under supplying the already very significant shortage of housing that’s required, and that’s evident in the rental crisis that we’re seeing that’s been a long time coming.
“So in very simple terms, I don’t think things will be changing, it will be fragmented though and it always has been. So when people talk about the property market, I don’t believe there is one because every area and different location, every property in every street is different from every other one. So there’s an opportunity here for those that are very smart about what they buy and where they buy it to continue to do very well in property for the next 15 to 20 years.”
What should Australians look for in a property?
Property investors should consider their options based on the three I’s of growth – infrastructure, industry and incomes.
“What we’re seeing a lot of now is real pressure on our borrowing capacity, which has an impact on your purchase price power. So the biggest thing we need to focus on now from an affordability perspective, especially given that we’ve had massive growth in property post-pandemic and it’s one of the very rare periods where we saw the rising tide flood all ships in property, because normally areas that are sinking going in a different stage through its growth curve. So for me, it’s not about regional or city, it’s about looking for quality properties and quality areas that have got current and ongoing growth drivers,” Bushy said.
“So there must be the three I’s of growth. Firstly, there needs to be new and growing infrastructure. I’m talking roads, rail and technology in particular. And in conjunction with that, you’ve got to have a strong and growing industry diversity. So you can’t be in a one-horse town. You’ve got to have a critical mass there with a number of industries that are growing, and that’s need to be supported by strong and growing incomes so that people can continue to pay more for properties as values in that particular area increase. So I don’t think it’s a regional or city discussion. I think it’s more a performance exercise.”
Should Australians purchase new homes as investment properties?
The team discussed whether investors should buy new homes, with Kevin revealing his residential location has a significant amount of new homes being built, with majority being owner occupied.
“Traditionally, I’ve been a big fan of new builds from a stamp duty savings perspective and the depreciation benefits which are much more significant on newbuild properties than they are existing properties. But you don’t want to be building properties in areas where there’s masses of undeveloped space that will dilute the ability for the values to increase,” Bushy said.
“But all we need now is for the industry to settle down, and it’s gone through a major period of disruption post-pandemic. We’ve had a shortage of trades, we’ve got a massive increase in the supply of material costs, and rates have gone up. So the only things we need before we can consider are building in the right circumstance in a tightly held area, and being able to control time, quality and cost. So if you’re borrowing the money, time is money. So you’ve got to be able to negotiate a fixed delivery time and a fixed price contract and make sure the quality of the build is there.
“The new builds are also a different thing to consider from an investment perspective because infill is a big thing too. You look at houses on double blocks as an example. Take the house off and build two new homes, they’re returning very well. So we’re big fans of new builds, and we helped a lot of investors into new builds up until Covid, when we pulled the pin completely because we lost confidence around the ability to control the cost. So once that cost controls back in the right circumstance, then it’s definitely an avenue that should be considered.”