Why on earth are property prices rising + The elephant in the property market with John Lindeman

It’s clear that we’ve worked our way through the COVID-induced recession and the resultant lull in our property markets has now turned the corner and the markets are on the move again.

Property predictions are now coming thick and fast. One is that there’s an elephant in the room that most aren’t aware of.

That prediction was made by property researcher John Lindeman, and I’m going to ask him what he means by that.

But first, I’m going to give you the answer that I gave to a journalist who recently asked me “why are property values going up at the moment, when wages aren’t going up and unemployment is still high?”

This should provide you with some insights as to what’s ahead for our property markets and help you make your own plans. And of course, I’m also going to share my regular mindset message.

Why are property prices rising?

This isn’t the same as asking why house prices are resilient.

Swelling disposable incomes at a time of falling interest rates and therefore lower property holding costs have left many borrowers much better off than they would have been a year ago. And we know that property is a game of finance and if credit is easy and holding costs are low, property values go up.

Like the virus itself, the economic consequences of the virus have not hit everyone equally. The people hit hardest by the pandemic tend to be lower income workers more likely to be tenants than homeowners. This has hurt the rental market, especially the apartment market, but not the overall property market.

Thanks to government intervention to support jobs, 90% of Australians are still employed. At the same time, many workers have recently seen their pay packets go up because of tax cuts. Australians have also wiped out a lot of credit card debt and stashed much more cash than usual as a buffer against Coronavirus.

So, a significant group of Australians have secure income, secure employment, and are in a position to take advantage of low interest rates.

The Elephant in the property market

One respected researcher believes there’s an elephant in the room that many people just haven’t been paying attention to and that happens to be John Lindeman

Now just to make things clear…John isn’t the Elephant – John is widely respected as one of Australia’s leading property market analysts. With well over a decade of experience researching the nature and dynamics of various types of assets at major data houses.

In a recent blog he suggests that an elephant is about to make his presence felt in the property market and it’s a potentially significant game changer.

It won’t be deterred by rising unemployment, housing finance restrictions, buyer confidence or economic downturns.

It has the power to radically alter housing prices and rents, and it’s about to be unleashed on our property markets. What is this elephant in the property market and where will it reveal itself?

The elephant is the massive movement of people from one State or Territory to another that will result in large changes to our property markets.

Before the pandemic there were twice as many people moving as there were new residents arriving or being born here, but there’s much more to it – these relocators pack a double whammy. Not only does every moving household increase demand by needing a new home where they move to, they leave an empty one behind, increasing housing supply where they move from.

• Even when our State borders reopen, the potential effect of these relocations is still likely to go unnoticed. This is because many statisticians and economists quote and rely on net interstate migration numbers, not the total number arriving or leaving.
• Net interstate migration hides changes in housing needs and preferences
• Where will the winners and losers be?

The most recent housing approval figures show that while approvals for detached dwellings has increased, there is actually very little in the pipeline for new apartments.

Developers are often blamed for building unsightly, even unsafe high-density apartments and encouraging speculative investment, yet housing development has been the means by which our cities and towns have grown and been rejuvenated.

Links and Resources:

Michael Yardney

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John Lindeman – Lindeman Reports

Shownotes plus more here: Why on earth are property prices rising + The elephant in the property market with John Lindeman

Some of our favourite quotes from the show:

“Now all credible economists agree that our property markets are going to enjoy a period of strong capital growth.” – Michael Yardney

“I couldn’t go from being unknown in the real estate community to being the most respected expert straightaway.” – Michael Yardney

“What I’m trying to say is at the time, I set myself some audacious goals that were unrealistic for me.” –Michael Yardney

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