I have just come back from a client breakfast in Brisbane. We had a full house! Thanks for braving the cold, Brisbane. I trust you got something out of this morning's dashboard. We are entering interesting times, and every single change will be attached to a number. Our job is to make sure that Custodians are well aware of what every change means to them. I have always said that we are with you for the long term, and every number matters along the way. That is what we do best.
So here is our market update:
In the last 3 months Sydney housing jumped a massive 6.8% which in my mind takes this boom to a new level. Melbourne jumped 3.8% and SE Qld 2.3%. These are big numbers at any time but particularly before an election and in the wake of Government changes to taxes for foreigners and banks cutting finance to foreigners.
Auction clearance rates are up. Sydney clearance rates have been higher than 70% through most of 2016 to date. Melbourne has also recorded high clearance rates, tracking in the low 70% to high 60% range week to week in 2016.
June’s numbers were also very high considering an election was coming up. The election weekend brought those numbers even higher albeit on much lower volumes.
First home buyer numbers are up. ABS data shows that First home buyers took out home loans to finance a total of 6,000 dwellings in April 2016 – the highest on record this year and up 24% (1,165) since January.
Negative gearing changes are inevitable.
The election proved one thing for us. We know that Labor proposed to cut negative gearing on second hand dwellings. Now two things could happen:
- Inevitably Labor will get into government at some point and the change will occur; or
- The coalition will do a deal to push through other legislation and negative gearing will pass.
We want to be ready if/when this happens – so what does this mean for Custodians?
This change will affect Custodians in 2 ways:
- We can still buy new house & land as we do now, but it means investors will flood the new land market driving prices up
- When we need to resell, it is likely that we will need to sell to owner occupiers.
Finance to investors took a turn for the better
On another level, the banks have cut finance to foreigners and have now turned around and increased LVRs (Loan Value Ratio) to investors from 80% lend to 90% plus. And of course, with interest rates going down, banks have moved their calculators to make it easier to qualify. How long is this going to last?
New student visa will change land use on our houses
A new student visa is out and my tip is to watch this space. It allows international children as young as 6 years old to study for 12 years in Australia. This is a big change for China, who until now, was not entitled to apply for this type of visa. It could open up a huge market...
Australia currently has 138,885 Chinese students (that’s almost 30% of all international students), and around 50,000 Chinese students started courses in Australia this year, up 13% on last year. This number could triple and that's big, as we are not only looking at universities but also schools as early as primary.
This change will no doubt alter two things for Custodians:
- Land use – more opportunities to convert our houses to student accommodation
- House price growth around primary schools and colleges.
Let’s go over the numbers – the webinar
There is a lot to cover – one blog is definitely not enough. So I’ve put together a webinar where I’ll go through all the numbers, projections, how and where to secure your land bank, new technology emerging to help Custodians, and of course I will give you an update on Custodian Partners getting to the next level with commercial development. Don’t miss it, it’s in July! We have set two dates to accommodate everyone.
Until next time,