It’s not too late to be early this property cycle with Jarrad Mahon

Property prices have been climbing at a breathtaking pace in 2021.

This has been good news for homeowners but heartbreaking for house hunters.

At the same time, there have been mixed messages in the media about what’s ahead.

Of course, there’s always the Negative Nellies wanting to tell anyone who is prepared to listen to them the market is about to crash, but other more solid commentators are suggesting our property market is slowing down.

And I agree, I believe the pace of capital gains has peaked, but I’m not suggesting home values are about to dip, far from it.

Rather I believe we’ve moved from a peak rate of growth to a pace of capital gain that will be more sustainable.

I was recently interviewed by Jarrad Mahon for his Perth Property Insider podcast, and because the questions he asked me were more general in nature, rather than related to Perth I asked his permission to replay the interview with you as I hope you’ll get benefits from my answers to his questions.

You’ll hear me answers questions like how much more life is left in the property cycle and you’ll be pleased to know that it’s not too late to be early for this property cycle – I’ll explain how long I believe is left in this cycle and where the opportunities lie.

Topics I discussed with Jarrad Mahon

• Last year when many of the bank economists predicted a 15%, 20%, 30% fall in property values I disagreed with them
• I’m on record in March and April last year suggesting that well-located A-grade homes and investment-grade properties would only fall about 5% in value and secondary properties would fall close to 10% in value and I got that right.
• I also called a turning point in our property markets in October last year when we could see on the ground what was happening long before it showed up in the official statistics. However, I didn’t really expect the market to rebound so quickly.
• All the property markets are stronger than they were 12 months ago.
• In the last three months, Melbourne’s grown closer to 6%.
• We’re in a cycle of upgrading
• Based on affordability I expect 20- 25% growth this cycle
• And while this will be a general increase in value around the Australian property market some areas are going to outperform others, as they always do and a lot of this will have to do with demographic
• High-end properties will outperform, and capital cities will outperform the regions
• In cities, the apartment market will languish
• While normally investors make up around 30% of our property markets currently, they’re making up around 20% of all property purchases. This will increase and as more Australians become comfortable with their financial situation and hear how well the property markets are performing, we will have a whole new wave of property investors, as has happened every other cycle.
• The unfortunate thing is that most investors will fail – they will not get past the first investment property and if history repeats itself 50% will sell up the properties within the first five years.
• Affordability and the deposit gap will slow growth
• Apra and the RBA said they are not going to interfere as long as lending remains responsible.
• It’s unlikely interest rates are going to go up, but we could see.
• It’s not really population growth that drives our property markets and more demographics which in part includes how many of us there are but also how we want to live and where we want to live.
• Population growth per se does not cross property price growth family formation does – my daughter just had a baby but doesn’t need any extra house.
• The return of cashed-up ex-pats is having to property price growth. It has been estimated that hundreds of thousands of people return to Australia over the last year, with many of them coming from cities that have more expensive property markets. Many are returning with plenty of Real Estate dollars behind them off in a stronger currency is the Australian dollar which supercharges their buying power even more.
• Ex-pats from expensive cities like London, Hong Kong, and New York often don’t consider our property prices unaffordable I’m not happy to pay whatever is necessary to secure a prestigious property in the desired location
• Immigrants often rent for a while because they’re not sure where to live and this is definitely affected our rental markets, particularly in the big capital cities.
• Immigrants don’t know where to buy – all they know is there a place of employment or maybe the university, so they are often start as tenants.
• Australia has a business plan to increase our population to 40,000,000 people by 2050. We plan to get to 30,000,000 people by 2030 – that’s unlikely to happen – more likely to be 29 million. But that means if you get into the property market today, you’re ahead of 3 ½ million other people are going to be buying property in the next 8 to 9 years
• There is no doubt that people move from one location to another because of affordability, but more important than that is jobs.
• The ability to work, live, and play all within 20 minutes’ reach is the new gold standard desirable lifestyle.
• Imagine being able to carry out your daily activities within a 20-minute walk from home.

Resources:

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Jarrad Mahon Investor’s Edge and the Perth Property Insider Podcast

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Shownotes plus more here: It’s not too late to be early this property cycle with Jarrad Mahon

Some of our favorite quotes from the show:

“It really has been just the huge change in consumer confidence that I don’t think anyone really expected.” – Michael Yardney

“I say this is a cycle of upgraders, and it’s happening at all levels.” – Michael Yardney

“Clarity is knowing exactly what you want in life, and what you need to do to get what you want.” –Michael Yardney

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