Podcast: Property price bounce, Qld confronts crisis

Queensland held a round table about housing and homelessness recently as the Sunshine State faces a similar crisis to the rest of Australia when it comes to a shortage of housing – including apartments – and a lack of available rentals.
We pick the bones out of the proposal to limit rent rises to once a year and the dismissal of other radical reforms that were proposed.
You can read the ABC news report on the Queensland proposals HERE and the report on the original summit HERE.
Meanwhile, skipping lightly over the fact that we completely failed to predict who the next NSW Fair Trading Minister would be, Sue had some good news for apartment owners (and bad news for prospective buyers) in that it looks like the market may have bottomed out.
Is it time to “buy, buy, buy”? Or might you be saying bye-bye to your savings if you jump in too soon. Sue has some sound advice for prospective buyers and sellers in the podcast.

TRANSCRIPT IN FULL

Jimmy  00:00

Good morning, from Edinburgh.

Sue  00:02

Oh, hi Jimmy! You do get around, don’t you?

Jimmy  00:04

I seem to, but I get around to the same places.

Sue  00:07

I feel like you’re commuting almost from Edinburgh, really. You’ve been to Scotland twice this month I think, haven’t you?

Jimmy  00:13

I have, yes. People are starting to recognise me at the airport. We are going to do another long distance Zoom. Edinburgh is very lovely, by the way. It’s a nice spring day here. It’s been ages since I’ve spent time in Edinburgh and I’m staying at a hotel called the Yotel, which sounds like it could be very youth-orientated, but there’s a gratifying number of grey hairs wandering around. It’s a bit like CitizenM, but with proper rooms, if that makes sense.

Sue  00:46

Because CitizenM has the tiny rooms, but really nice common places, doesn’t it?

Jimmy  00:51

Yes. Well, this has a really nice commonplace and a big restaurant attached and the rooms are pretty fabulous. It’s got the bed that folds up; you know the one that you can sit up in? It sort of moves up, to put you in a sitting position, so you can watch the giant television in your room. I think they know their market.

Sue Williams  01:19

That sounds very pleasant.

Jimmy  01:20

And 24-hour free coffee, which CitizenM doesn’t have. Anyway, we’re not here to talk about hotels, we’re here to talk about apartments. And there’s been a big housing summit in Queensland in the past week or so. We’ll have a chat about what they resolved and you’ve got something about house prices?

Sue  01:41

That’s right. Evidence that we’re kind of past the bottom of the market now and prices are really bouncing back, for both houses and units. So  that’s interesting. I mean, it’s good news for some; not so great news for others.

Jimmy  01:55

Okay, we’ll talk about that in a minute. Obviously, the message is buy, buy, buy! I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  02:05

And I’m Sue Williams. I write about property for Domain.

Jimmy  02:08

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

So quite a lot came out of that housing summit in Queensland, but I’m wondering if anything’s going to make an awful lot of difference?

Sue  02:32

Well, they’re kind of saying they’re going to put an awful lot of money in Queensland into housing support, aren’t they? To try and help with the problems of homelessness and put some money in there for cost-of -living relief, emergency relief and food relief, which is all fantastic. But I guess the housing supply is still the big problem.

Jimmy  02:53

I mean, I think one of the issues with Queensland when it comes to apartments, is their apartments were initially built for holiday rentals, for the first 50 or so years of apartment building in Queensland…They were being built for people who could rent them out to holidaymakers and maybe, stay there themselves for a while, which led to the whole messy business of caretaker management contracts. And then they realised that there were people who wanted to live in apartments as residential homes and so they brought in a different kind of legislation for that. And then along came Airbnb and decreed that residential homes actually could be used for rentals as well. So it’s a bit of a mess, it has to be said.

Sue  03:45

Did the conference come up with any solutions to that, or any way forward?

Jimmy  03:50

Well, the only thing of real significance for tenants is that they’ve changed the law, so that you can only put in a rent rise once a year. Previously, it was every six months; that was the maximum. So that brings it into line with New South Wales and Victoria. I don’t know if bringing things into line with other states is really a radical leap forward, or just basically catching up. They still have no-cause rent evictions, or terminations, so that basically all the landlord has to do is give notice; ‘in X number of weeks, your lease is up and we’re not going to renew it,’ and that causes exactly the same kind of instability that happens in Victoria and New South Wales.

Sue  04:43

Because that means that anytime they want to put the rent up, they can just evict their tenants, can’t they really? You know, within six months or something, put up the rent and then bring somebody else in. It kind of makes a bit of a nonsense of the extending the period of no rent increases to a year, really.

Jimmy  04:59

Absolutely and we did have that disgraceful episode in Bondi recently, where a real estate agent wrote to all their landlords and said “you need to evict your tenants now, because that’s the best chance you’ve got of putting rents up in a booming market.”  It’d be nice to think that real estate agent was lying in a gutter somewhere right now, but they’re probably driving around in a Lamborghini, with the state of things. I just think it’s awful. I think it’s one of the most disgusting things I’ve ever heard in real estate. Just so heartless; you know, telling all your landlords “hey, if you want to make money, get rid of your tenants now, and start again, with much higher rents.”

Sue  05:48

Absolutely. And hopefully, a lot of those landlords would have ignored that agent, as well. I mean, we can’t characterise all landlords as being real money-grubbing people… Most of them are really decent people, who want good tenants and want good long-term tenants. And of course, they’ve got to cover the costs of their investment. But at the same time, they have a responsibility; they know they have a responsibility to provide homes for people, and decent homes.

Jimmy  06:16

I believe that there’s been a bit of a backlash against agents who are telling their landlords to “make the most of your investment, and get rid of your tenants.” This is anecdotal, but some landlords have said “hey, I’ve got a better idea. I’m gonna get rid of you, because I don’t like the way you operate.” Which is good, because as you say, there are good, moral people out there. They want to (obviously), make the money on their investment, because that’s what an investment is for, but they don’t necessarily want to be money-grubbing and have that the only thing that motivates their decisions.

Sue  06:55

And in the summit, was there’s something about the idea that rent rises should be pegged at the same level as interest rate rises?

Jimmy  07:02

Yes, I think that was either in the summit, or around the summit, that one of the tenants’ groups suggested (because we know that there’s absolutely no danger of a rent freeze being imposed, which a lot of tenants groups would like to have happen right now)…. But one of the the advocates said “well, why don’t we just peg rent rises to interest rate rises, so that, okay, the tenants are going to have to pay more, but at least the landlords, the owners, the investors, aren’t losing money if they’re not allowed to raise the rents by a certain amount?” This caused a huge outcry by real estate agents, property developers, managers; they’re all saying “oh, no, no, you can’t do that. That’s just going to distort the market, blah, blah, blah…” All the usual reasons. And what they’re actually saying is “this is a terrific opportunity for us to make windfall profits; don’t take it away from us!”

Sue  08:04

That’s horrible, isn’t it really? Sometimes, these kind of times bring out the best in people and the absolute worst.

Jimmy  08:12

Yes. I think we have to commend the Queensland Government for having this summit, because they’ve genuinely looked at every area that they can, in terms of what they can do to protect people who can’t find housing. They know there’s no silver bullet; there’s no magic pill that’s going to fix everything. But yeah, one of the things they’ve done is there is a Federal Housing Support Scheme for low-cost housing for essential workers and people like that and that’s due to run out this year. And so the Queensland Government is in the process of buying up those properties, and handing management of them to a low-cost housing charity, which is fantastic. And it should be commended, but then you have to think, well, they haven’t actually moved forward; they’ve just stopped it from going backwards, which is an achievement, as well.

Sue Williams  09:17

You kind of wonder if the new New South Wales Government will be thinking of doing something similar, really?

Jimmy  09:22

You would hope so. Well, we’ve got a new government, and I think that they probably are going to be thinking in those terms, which is good for tenants.

Sue  09:32

Absolutely. And tenants need all the help they can get the moment, really. It’s still really, really difficult. Vacancy rates are still painfully low. Rents are still going up all the time and it’s a very hard time to be renting property. It’s an even worse time to be trying to rent a property and trying to get through the process; queuing up for for ages in a big queue, lots of people applying for every single vacant property. It must be so disheartening.

Jimmy  10:03

Yes. There was an interesting comment that came through the other day, about the ban on rent-bidding. Somebody (I think it was a real estate agent), was saying that all it’s done is made tenants aware that they could bid higher. I had an email the other day from a woman who runs a genuine homeshare Airbnb in Tasmania and she was responding to a story about tenants in a row of houses, all owned by the same person. They saw a notice on their front gate, an application to the local council, to turn them into Airbnbs. It was quite ironic, because she was arguing (and I’m hoping to be able to turn it into a column for the Fin Review); she was arguing that landlords are being pushed into this situation, because laws favour tenants too much. She was using that article, because somebody in the article was quoted as saying ‘it’s too hard to deal with different long-term tenants, because some of them are disruptive and destructive and it’s just much easier to work on a short-term rental basis.’ And funnily enough, you know, that article was presented as very much a horror story about “look what’s happening to our residential rentals,” but she read it as proof that it’s too hard to do residential rents. So everybody looks at these things from a different angle.

Sue Williams  11:45

Hopefully, things will ease up soon; one can only hope.

Jimmy  11:48

We can. When we come back, you’re going to talk to us about house prices and apartment prices, bouncing back. That’s after this.

[MUSIC]

Jimmy

So Sue, what is happening with apartment prices and house prices generally?

Sue  12:10

Well, it’s interesting, because for a long time, people have been saying “the bottom of the market must be quite soon,” but obviously, you never really know when the bottom of the market is, until you’re passed it. And now people are starting to say “we think we’ve passed the bottom of the market,” and prices are starting to rise again, and that’s both for houses and for apartments. It’s actually happening (according to Ray White; the statistics from them), throughout Australia. It’s being led by Sydney, which has seen a big bounce back of 4.1% from the low date of December the 31st last year. That’s the real bottom. But now, prices have gone up 4.1% since then, and in Melbourne, they’ve gone up 3%, in Canberra 2.7%. Hobart, 2%, Brisbane, 1.8%. So it’s actually looking quite healthy. And the fact that even Adelaide, which is traditionally the slowest market of all, even that has bounced back as well, by 1.1%. It kind of suggests that probably, prices are again going to be on the rise. So those people who own their own homes will probably be very glad and relieved about that. Obviously, people still trying to get into the housing market, will probably feel a bit gloomy.

Jimmy  13:28

Is this a signal for people who want to make the most of the opportunity to get in and buy now before prices get any higher, or is it too early to say?

Sue  13:39

One would think it was a good time to buy now, because prices are still quite soft and if they start increasing more quickly, then it’s really important to try and get in as soon as you can. And as well, because prices are improving, it does mean that more people will hopefully put their homes on the market. The problem is that there’s a massive shortage of stock on the market, but rising prices will encourage homeowners to start thinking about upgrading, or right-sizing or downsizing and so they will start putting their homes on the market, because they’ll think “well actually now I might get a decent price; I might not have to sell for a loss.”

Jimmy  14:20

So those prices; have they recovered the losses of the past year or so, or is it just that they’ve turned around?

Sue  14:27

Well, they think if this continued, there’s a potential that the declines that we saw in 2022 will be completely reversed by the second-half of this year. So all the losses that we made in 2022, will be wiped out by the improvement in prices in the second part of this year. So that’s pretty amazing, when you think by how much they dropped.

Jimmy  14:52

That’s something we shouldn’t forget; that they dropped from very high levels, didn’t they? The people who suffered most, are the people who bought at the height of the boom, and then suddenly, the bottom dropped out of the market. But apparently it didn’t drop out of the market, because we’ve just bounced off it again.

Sue  15:14

Sure. I mean, it is quite difficult for some people. We’ve got lots of people who are on fixed-rate mortgages and obviously, interest rates have gone up so much over the last year. In May this year (next month), there’s going to be a huge number of people whose term and fixed-rate mortgage is going to expire. So there’ll be going onto a variable mortgage and they’ll see their rate jump by a huge amount.  So there’s going to be a lot of difficulty and there could be some distress sales; that kind of thing. So, you know, we’re still not out of the woods, really; we’re still not quite stable enough. And I think the problems with the banking sector in Europe and in the US, where banks have gone bust, or been bought out, that makes people feel a bit anxious as well. And then, of course, we had the big construction company, Porter Davis, go bust the other day and that’s really scared people, too. So people feeling a little bit jittery; consumer sentiment is down and business confidence is down slightly, as well. We kind of want to keep seeing these good indicators, to make us feel much better, more confident, and happier with the housing market.

Jimmy  16:26

What we don’t want (and it’s probably a good thing in a way), is that we don’t want everybody to go nuts again. It’s quite good to have a sense of some optimism, but not crazy ‘buy, buy buy,’ which will just cause the same problems as they were in the past.

Sue  16:44

Yes, absolutely. Because it is still very, very difficult for first homebuyers particularly. And there was a big Domain report that came out recently and it was saying how the time it takes for a first home buyer to save up for the deposit on a home, has actually decreased slightly. And that’s because the interest rates have gone up, so their savings have gone up. And with prices softening, it means that they don’t have to save up for quite as long to get the 20% deposit that they need. That was quite good news, but with prices going up again, that could well wipe out that.  I found it really interesting, because in Sydney, to save up for a 20% deposit, it would take an average of six years and eight months. Wow! I had no idea it was quite that long. I guess these days, lots of people have the mum and dad bank that helps them. A lot of people are getting a lot of help from their relatives and grandparents and parents. But gee, six years and eight months; that’s a long time to save up for deposit for a home, isn’t it really?

Jimmy  17:50

And you wonder what other demographic effects that might have. For instance,  if you’re a 22-year-old, and you’ve just started your first major long-term relationship; I would imagine when people are thinking “well, should we have kids?” they might be thinking “well, let’s wait till we’ve got a house, or an apartment of our own, before we even think about that.” Because nothing eats into your income quite like having children.

Sue Williams  18:20

Absolutely. So it’s really, really difficult. It would change the market completely, in lots of ways. Because this study was for people aged between 25 and 34. So you know, people in their early 30s can’t delay having kids for too long. It really distorts everything, I suppose.

Jimmy  18:41

It does. We talked regarding the Queensland issue, that there’s no silver bullet; there’s no magic pill. But there is one thing that could make a hell of a lot of difference and that is building more homes and that means building more apartments. One of the initiatives that came out of the Queensland summit, was that they are offering huge incentives to developers to build homes; to build apartments especially, with 10% of the dwellings allocated to low-cost housing. What they’re saying to the developers is, we will make it easier for you to build these buildings, and we won’t tax you as much on land tax… In fact, they’re saying half the land tax that they would normally take, for anybody who builds under that system. That’s the kind of thing that needs to happen. It’s the kind of thing that could potentially make developers who are a bit wary go “actually, now this makes sense; to get into this market and build these apartments. 10% of them devoted to low-income people would be a good thing.”

Sue  19:54

You’d hope that other people would follow really; other states would follow that.

Jimmy  19:59

But you know, you get the reality of what’s happening when you see one of the initiatives in Queensland for protecting tenants and giving them grants to help them get bonds, is that as individuals, or a group, the rent that they pay must not be more than 60% of their income. That’s the cut-off, which means people are spending a huge amount of money on their homes. Okay, now Zoom is telling us it’s about to cut us off. I think we’ve covered most of the issues?

Sue  20:34

Yes. You’ve done well with the fact you probably haven’t had any sleep at all and you’re going over to see family and it’s quite a sad time for you. So you’ve done very well, Jimmy.

Jimmy  20:47

Oh, thank you. You’re too kind. You know, to try and keep me away from a laptop,  I have to be sedated. The next time we speak on this podcast, I’m going to be in another country, I think.

Sue  21:02

Which country is that?

Jimmy  21:04

 I think I’ll be in Vietnam. So yes, that’s going to be another technological challenge.

Sue  21:12

That’s fine, because it’s only another week, and then you’re back in Australia, I think.

Jimmy  21:18

I apologise to anyone who’s found it hard to hear. It may be that it was crystal clear; we never know until we get the download and clean it up and send it off to our local ‘Buzzsprout,’ the people who send this out to the world. They clean it up as well, so it might be crystal clear and people will be saying “oh, it sounds fine; what are you talking about?” Let’s hope so.

Sue  21:41

Thanks, everyone, for listening. And thanks, Jimmy.

Jimmy  21:44

And thank you for being on the other end of this Zoom call and we will talk to everyone again soon. Bye.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favourite pod-catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week, without even trying. Thanks again. Talk to you again next week.