The big news of the week – aside from the launch of James’ book was Lockdown 4.0 for Victoria.
It’s not necessarily big news because of the hard time Victorians have gone through in the past 12 months, or even the warring words between State and Federal politicians.
To us, it was big news because it will be the first time Victoria goes through lockdown without the eviction protections offered to tenants. You might recall we mentioned a couple months ago that the moratoriums on the eviction of tenants ended on March 31 this year.
(For landlords dealing with tenant disputes over rents, feel free to email us if you want some guidance on navigating hardship requests from your tenants.)
Fortunately for those in Victoria the State Government has announced some stimulus packages for workers and business owners affected by the lockdown – more info here.
At the other end of the spectrum, the ‘Rich 250’ list was published by The Australian Financial Review over the weekend.
There were 111 billionaires on the list, which was up from 104 in 2020 and 91 in 2019, which again reinforces the difference between how Australia and the rest of the world are navigating the pandemic. It also shows the two-speed nature of the COVID-19 recovery, some people are really struggling financially and there are others who are actually increasing their wealth during and post-pandemic.
Property was again the biggest sector for growing wealth on the list, with 61 of the 250 billionaires
accumulating their wealth through property.
Next highest was the resources sector (28 billionaires), followed by retail (21), fast-riser technology (20, with two of those billionaires in the top five), financial services (14) and manufacturing (10).
It is worth noting that 23 of the 61 who built their wealth in property started out making money in another field before accelerating their wealth via property. In fact, 17 different industries to be precise!
All numbers aside, my favourite story to come out of that article was about the founders of Culture Kings, a retail brand selling sneakers, baseball caps and T-shirts.
It was founded in the mid-2000s by Gold Coasters Simon and Tah-nee Beard, who have built the business and their own net wealth to an estimated $626 million.
It all started out as a side hustle selling clothing at the weekend Carrara markets (on the Gold Coast) which evolved into an eBay business. The couple imported brands from the US and sold them in Australia for a profit.
“There were these Dickie’s shorts and they were selling for $100 at [surfwear retailer] City Beach. I could buy them at Walmart for about $10. So, I got a friend to buy me boxes and send them over,” the article said.
From those humble beginnings, Culture Kings now employs 700 people and turns over $183.7 million for a net profit of $19.4 million.
While it’s been written as an overnight success story, it’s really a story of compound growth over nearly two decades!
It’s well known the housing market is firing on all cylinders at the moment with prices and rents increasing.
SQM Research – one of the best property rental research companies in Australia – says the median asking rent for a house (i.e. not including units or townhouses) on the Gold Coast is now higher than the median asking rent in Sydney. The median asking rent for a Gold Coast house right now is $754 versus $663 for a house in Sydney.
In the past 12 months asking rents in Broadbeach increased by 40.1 per cent, Burleigh by 38.9 per cent and Stradbroke, which only has a population of 170, by 38.7 per cent!
The problem is supply.
Louis Christopher, head of research at SQM, says “it’s up to the council to help resolve the rental crisis, which they can easily do, if they decide to release more land or change the zoning on the land.”
The solution to affordability is supply and density. Our governments have prioritised the latter over the past decade and it’s kind of worked.
In 2011, 75.6 per cent of Aussies lived in a house versus 72.9 per cent in 2016. In other words, there has been a trend toward smaller and denser housing (units, townhouses, etc). Sydney – the most expensive market in Australia – has led that charge with 63 per cent of people living in a house in 2001 versus just 56.9 per cent in 2016.
However, we’ve seen that trend reverse in the wake of COVID-19 and lockdowns in Australia. Unit prices and rents dropped throughout 2020 while house prices and rents soared, signalling a move away from higher-density housing.
Supply, however, is not a quick solution, it involves unlocking and rezoning land then building the infrastructure to accommodate the population. We’re talking years if not decades!
Speaking of affordability, the NSW Government released a White Paper on the cost of housing. It found that more young adults were choosing to live with their parents because of affordability pressures. It said the proportion of young adults living at home with their parents increased from 23.6 per cent in 2010 to 32.4 per cent in 2018.
The theory is that this change has reduced the burden on housing supply, with mum and dad taking the pressure off the government and housing market.
It’s for all these reasons that land prices have continued to increase in value over time. I don’t see that changing anytime soon.
Interested in knowing more? Check out the weekly podcast we do at The Double Shot Podcast.
James and Alex