George Markoski
Hello, everyone, and welcome to the Positive Property Show, your weekly dose of property investing in Australia. George Markoski, your host, and Adam Albright, my co-host tonight. Hi, Adam.
Adam Albright
Good evening. How are we all? Welcome.
George Markoski
Now, look, tonight we’re going to be talking about a topic that I’ve heard around the traps. People are talking about the coming Australian property crash. So I’m going to talk about the truth about this headline and what’s happening in Australia. Now, you and I have both been around the block quite a few times.
Adam Albright
Seen prices go up, down, in between.
George Markoski
We’ve seen it all. We’ve seen it go up, down, sideways. I’ve been part of a lot of property booms. I’ve experienced property corrections and crashes. So I’ve seen it all. Now, Mark Twain, he says history doesn’t repeat, but it rhymes. And what he means by that is we can look at the past and see what factors affected different things to try to work out what’s happening in the future, if you know what I mean. Right. Because that’s the best place to get experience from. So I’m constantly looking at what happened in the past and I’m constantly looking at, okay, I look at the world headlines and what’s happening. And then I go, okay, when this sort of stuff was happening, when it comes to politics, economy and everything, what happened last time and is it going to happen again?
George Markoski
Because at the end of the day, my main job is to predict things. Really what I do, I need to predict what’s happening to property prices over the next 10, 20 years. Which areas are going to go up, which areas are going to go down. That’s my main job. And I look at this job seriously and I spend a lot of time looking at it. I caught up with a friend of mine today, a very successful real estate agent in Adelaide, and we were having a bit of a chat about world affairs. And I was fascinated because he was fascinated that I know so much about politics and he’s thinking, well, why do you know so much about politics when property is, you’re the expert in property? And the reason I’m an expert in politics is because politics affects property.
George Markoski
Because politics is really where policy happens and policy affects the economy and the economy affects property. So at the end of the day, if you want to be good at property or money on a macro scale, you need to understand politics, you need to understand global supply chains and what’s happening in the world. Otherwise, you know, we live in a global society and everything affects us as we learned over and over again. And I’m going to be showing you what’s happening and everything else like that. So funny enough, we’re talking about the CGT that’s happening and he owns quite a few properties and he’s like, look, if that comes in place, I find out what it’s due and I’m just going to sell because it’s going to.
Adam Albright
Cost a lot of people in that boat as well.
George Markoski
Because he’s thinking it’s going to cost me too much. If he loses 50% discount for the properties he’s got, it’s going to cost him millions of dollars. So he’s got like a $5 million reason why I should just sell right now and how’s that going to affect everything? Right? That’s the question. Because there’s probably other people like that as well. The other thing I look at is what’s happening around the world and what happens in other markets. Because if you look at America, Canada, New Zealand, UK, they’ve got similar property markets to ours, especially America, Canada, New Zealand, and I like to look at them. So, okay, state of the nation. Now look at this. New Zealand’s three-decade housing boom is over. If you look at this graph, post-COVID, New Zealand went through the roof and now they’ve had a major correction.
George Markoski
New Zealand’s been going gangbusters for 30 years straight. So what’s happened? They got tighter lending rules, they changed taxes, higher costs, rising interest rates. But what’s the real story behind this? Is that really all it is or is there something behind this? And I’ll tell you near the end, so stay watching because I’m going to talk about this because, you know, those things matter. Tighter lending rules, tax changes, high costs and rising interest rates do matter. But some things matter more than others. And what we need to do is we need to find out what’s the real reason. So investor sentiment in New Zealand has deteriorated sharply and a record number of investors are planning to sell and buying intentions have fallen into negative territory. So what’s happening is more investors selling and investors aren’t buying. But what does that mean?
George Markoski
Well, if you’re selling, more people are selling and less people are buying. That affects supply and demand. And you’re going to hear me talk about supply and demand all night tonight because that’s what I talk about every night. Because that’s when it comes down to the fundamentals. A lot of people think property investing is hard. And the reason they think it’s hard is because yes, it is, but they think it’s complicated. But it’s not complicated. It’s actually simple and it’s a simple equation. And what it comes down to at the end of the day is two things. Supply and demand, mortgage rates back to pre-pandemic levels. So what happened was the property markets went up, the Reserve Bank cut mortgage rates and then housing activity and price remains subdued because interest rates have gone up as well. Now Canada, look at Canada.
George Markoski
Canadian home prices have fallen 17% from the February 2022 peak, a drop of nearly $149,000. Now look at this graph because I’d like to show you this graph because I really love looking at long-term trends. And see in 2020, if you can see the black line is diverging from the red dotted line. So the red dotted line is where the market is heading and that’s the long-term projection. And what you like to see is you need to look at the gap, right? Because what happens is if prices are above that gap, they’re going to go back to that line and if they’re below that gap, they’re going to go back up to that line. That’s what normally happens. And you can see they diverge quite a bit from that trend.
George Markoski
And that’s why it’s coming back down again and actually going below it. So even strong housing markets can fall. And New Zealand, Auckland, Wellington and Canadian prices fell. New Zealand prices fell as well and both were very strong markets. Now the big question is, is Australia next? That’s probably the burning question for everyone. Now let me show you this graph here. See, immigration is keeping Australia’s housing market strong. So the key difference between Australia, Canada and New Zealand is that Australia’s population growth remains strong. Driven by immigration, it is combined with a persistent housing shortage. This continues to support strong demand for property. However, these overseas examples are showing housing markets can still correct. So if you look at population growth, look at Canada, the blue line, how high it was and look where it.
Adam Albright
Is now, right down 3% and down.
George Markoski
Yeah, it’s nothing. New Zealand, bang. Look at Australia, still up there and actually growing. Now it’s actually starting to go up again. So you look at Canada and New Zealand and we can talk about interest rates and we can talk about taxes, we can talk about all that all night if you want. But really, we all know what really caused it was they cut off the tap of immigration. So they stopped the demand, which increases the supply, and that’s what happened. That’s really the key. So let’s go through the fundamentals for Australia and see, is the tap on? Is it off? So look at this housing market diverging across Australia, where you look at Brisbane, Adelaide, Perth had the highest growth and Sydney and Melbourne have had the lowest growth.
George Markoski
Now this graph makes it look like prices are high in Brisbane, Adelaide, Perth, but they’re not. It’s just the percentage of growth for the properties, just to be clear. So what drives housing growth? Population growth above long-term trends is the number one thing. Employment growth, real wage growth, tight supply, low vacancy. Undervalued housing attracting local buyers. Demographic mix supporting upgrader demand. Education quality, creating strong micro markets. Now let’s talk about this. In Australia, population growth, is that a tick? Is that a yes or no, Adam?
Adam Albright
Yes, definitely. Employment growth ticking. Keep ticking away, mate, ticking away.
George Markoski
Real wage growth.
Adam Albright
Wages are growing. Tight supply, low vacancy.
George Markoski
Definitely. Undervalued housing attracting local buyers. That’s a tough one.
Adam Albright
But you’ve also got, if you want to talk locally, you’ve got people who’ve made a lot of money in their houses going up and now wanting to upgrade to a bigger house. So I’d say yes, I’ll give this.
George Markoski
A bit of both. Demographic mix supporting upgrader demand. Yes. Education quality, creating strong markets. Maybe. Yeah, both of these are tick, tick, tick, tick.
Adam Albright
With the education one, we’ve got people who want to be in a potential school zone. So let’s say you’ve got a good education and that will create its own market within a suburb.
George Markoski
Working age population growth accelerated. Right. Working age, because people that are working age, they’re the people that are making money, because if you’re not working age, you’re not making money. And these are the people that really matter. So Australia’s working age population is about 262,000 above its pre-pandemic trend. And the surge is largely driven by Queensland, Western Australia, South Australia. Well, look at that. Queensland, Western Australia and South Australia have got larger population growth. Where’s most of the growth happened the.
Adam Albright
Last five years in those three places?
George Markoski
That’s right. It’s a funny thing that I keep talking about. I keep talking about population and property prices and I keep proving it over and over again. All the stats say the same thing. All right, okay, look at this. And this slide proves it. The sharp divergence in price growth between Brisbane, Perth and Adelaide, the Sydney and Melbourne reflects stronger population growth. Hello. It also reflects tighter supply of fewer homes listed for sale in Brisbane, Perth, while Sydney and Melbourne remain relatively better supplied. That’s because Sydney and Melbourne have got a lot of units now. Queensland has experienced the strongest interstate migration and house prices have risen. And what happened was everyone was leaving Melbourne and moving to Queensland. I’m wondering now, look at that gap. I’m wondering if Queenslanders are now going to start coming back to Melbourne.
George Markoski
We’re not going to go there for the weather, are they? Or the taxes.
Adam Albright
It’s affordability in Melbourne too.
George Markoski
Yep. So affordability is improving in Melbourne, but the weather, the taxes are better in Queensland. So Victoria is becoming more affordable than Queensland. Can you believe that? Now Adam, I don’t know if you remember about eight, nine, ten years ago, Victoria is becoming more affordable than Queensland. Now the RBA is under extreme pressure to hike again because our job market is so good. Recent job growth has concentrated in full-time roles. Unemployment’s really low and working hours are rising. What this shows is that the economy is doing very well. There’s lots of money, there’s lots of people working, which is good news. And yet even the markets, financial markets, are actually expecting the RBA to hike rates again. So maybe one or possibly two before the end of the cycle. Lovely. RBA. Never do what I’d do.
George Markoski
I’d order them to drop rates down to zero or minus one. Now, if rates go up, mortgage costs are going to go higher. That’s pretty normal. So for a typical mortgage it’s $736,000. If another rate hike comes in, then people are going to be paying an extra $116 per month. Now $116 per month is probably not going to knock many people out of the market, but it just puts more pressure, which is really unfair. Now Australians remain bullish on housing. So Australia’s housing market is now the most expensive on record relative to incomes. And despite that, consumer expectations for house prices remain strong and all surveys, everyone expects property price to go up, including all the experts, including myself. So significant increase, modest increase, price is steady. So 66% of Australians expect property price to go up this year, which is true.
George Markoski
Property remains Australia’s preferred wealth strategy with tight housing supply, strong population growth, persistent buyer demand and a strong cultural preference for property investment in Australia. Population growth is running at record levels in Australia. Now the other thing is there’s a major trade shortfall emerging in Australia and we need an additional 117,000 tradespeople to help build more houses. That’s the only people we need. Construction has too many suits, not enough tradies. So you look at the green line, that’s all the people doing the work and the blue line above it is all the people in suits. I don’t know what they’re doing, but there’s more planners than other people. So a lot more suits and suits don’t actually help build more houses. And now tradies make up a smaller share of construction.
George Markoski
Construction costs have gone up and surged, as I’ve said before, and dwelling approvals shatter housing targets. So approvals have gone down even though we’ve got all those suits. So Australia is facing a major housing shortage, a deficit of 200,000 to 300,000 homes currently and growing. And the other thing is a lot of property investors are now piling in before the tax changes. So investor mortgage jumped 5.5%. A lot of investors are rushing in and buying ahead of potential changes to negative gearing capital gains concessions because the government may grandfather these deals. So people are jumping in to make sure they get grandfathered. Look at this article here. Australia’s building construction industry is facing a shortage of 300,000 workers and now it’s actually actively recruiting mature age apprentices to.
Adam Albright
Fill the gap on that last one. They’re also paying very large incentives to have tradespeople stay in an apprenticeship. So there’s like a $5,000 sign-on bonus for this, bonuses for that. So they’re pumping a lot of money into keeping the tradespeople actually working.
George Markoski
Yep, they are. They are. Thanks for sharing that. I wasn’t sure about that. Okay, now let’s have a look at this. This is the last 30 years. It’s quite a big graph. Now we’re just going to look at the red graph, combined capital houses. Right. And what I want you to do is look at, you know, from July 1992 to July 2022. What’s happened to that red line? It’s a trajectory going up. Would you agree with.
Adam Albright
Yes. Only goes one way.
George Markoski
Only goes one way. And basically, if you’re in it for the long term, what’s going to happen to your investment? It’s going to go up. But what happens during a correction? Well, look at this, right, this is the thing. So there’s people waiting to get in the market because they’re waiting for the property price to drop. But you look at the corrections, how small they are. Look at this correction in the middle here, called the GFC. Australian housing values fell 7.5%. Right. That’s the last time we had a major correction. Right. And what happened? We had a little correction and then went back up really quick, higher than what it was before. Then it went down a little bit. During 2011, RBA commences cash rate easing. Then it goes up. Then we had a little correction here.
George Markoski
Investors reach a record high proportion of mortgage activity. Then it goes up. APRA introduced a 30% limit. Sydney, Melbourne housing values peak. And what happens there? We had a correction before COVID. Then COVID hit, bang, went up again. After COVID, we had a little correction, didn’t even notice it, went up. It’s actually gone down a little bit and it’s got a continuous merry way. Now, those corrections are very small dips, but not only that, they happened in a very short time. And the challenge is, how do you pick that? How do you know? And people that are waiting for the market, they miss it altogether. Now, Adam, what happened to our members, our clients, during the GFC?
Adam Albright
Yeah, I was going to say. Yeah, back in 2008, what happened to.
George Markoski
All of our clients?
Adam Albright
Sorry, look at the graph. Everyone who bought, you bought there. It dipped down a little bit and then it took off again. I remember back in 2008, you could buy houses for, you know, in Coomera for $300,000. They’re now worth $1 million.
George Markoski
Yes. But we had clients where their property prices actually went up during that period as well. That’s the thing, because we’re in the top 100. And the ones where it didn’t go up, they waited a while, they went up again. That’s what happens. Because you can never time the market. And the key is, you know, with all this talk, is there going to be a housing crash? And I want to be honest with everyone, listen carefully. We don’t know. I know the long term, it’s going up. And at the moment we’ve got a massive problem with supply and a lot of demand. So it’s going to keep going up. What could happen? They could cancel the capital gains tax concession, they could cut population, they could hire 300,000 tradies, and we can reduce inflation.
George Markoski
If that all happened, it would take quite a few years, but then that would slow the market down. But at the moment, it’s impossible to slow this market down. It just is. So the fact of it is, property prices are going to keep going up and people should stop worrying about corrections and start planning on investing for the long term and getting properties that consistently double every seven or ten years over and over again. Because the whole key is you buy in the top 100, you buy properties that consistently double every seven or ten years and you create money for life. You create money that keeps growing. You create a passive income that you get every year, every week, every month, and it keeps growing every year and your equity keeps growing and life just keeps getting better. That’s what it’s all about. Okay?
George Markoski
Real people, real results. Have a look at this. Okay, look at this. This is one of our events in Adelaide and all these people came along for three days and we had an amazing two days. Now our events are three days long because they’re even better. So this is Capalaba. We’ve had Nick and Steph Oliver, Paul Lee, Rod Mansoor. His nickname is Mac Daddy. Love that, don’t you? Shane, Joey and Christine Enzo settled in 2019. Purchase price was $400,000. Deposit $40,000. Current value $929,000. Current profit, $529,000 profit. Awesome work, well done. Next, welcome our new members. We’ve got Charlotte, we’ve got Vicky, we’ve got Matt, and we’ve got Jasmine. Hello and welcome. Okay, everyone on our podcast, everyone on Facebook, YouTube, thank you so much for watching us.
George Markoski
Now if you want help investing, if you want to make sure you don’t miss the next boom, type in hashtag boom. My team will reach out to you. Thank you. Bye bye.
