Key takeaway: Smart investors are moving down the price range after the budget, towards lower-value, higher-yield assets. Joe Tucker, Director and Head of Research at Property Principles, says sub-$850,000 properties are highly competitive, and the bracket between about $400,000 for units and $750,000 has become a ‘messy middle’, squeezed by first home buyers and wealthy investors dropping down from the top end.
In this episode of Geared for Growth, Mike Mortlock is joined by Joe Tucker, Director and Head of Research at Property Principles, one of Australia’s leading buyers agencies specialising in residential and commercial property investing.
Joe brings a front-line view of what’s actually happening in the market right now, from investor hesitation post-budget to the surprising pockets of opportunity emerging across different price points.
With shifting tax settings, changing sentiment, and a clear divide forming across the market, this episode breaks down what investors need to understand to move forward with confidence.
Joe sees three types of investors: those buying in their personal name, those using companies and trusts, and those buying through a self-managed super fund. Company and trust buyers had no choice but to wait until the rules were locked in, around two weeks before recording. He calls it probably the worst sentiment for property investing since the GFC, noting that COVID was really bad but bounced back quickly.
Joe says no, and that prices are driven by supply and demand. He says the 1.2 million home Housing Accord target now looks more like 900,000-odd, leaving Australia about 324,000 homes short. At roughly 2.4 to 2.5 people per dwelling, that’s around 810,000 people, which he compares to the Gold Coast and Hobart combined. With about 1.4 million people arriving over the next four years, he expects prices to go up.
Joe says the right ones do. He targets low-set brick blocks of one to three levels with no pools, no lifts and low strata. A Kippa-Ring unit he passed on in March 2019 sold for $185,000, and an identical unit in the same block has since sold for $595,000. He cites house-to-unit price gaps of 57% in Sydney, 42% in Melbourne and 37 to 38% in Brisbane and Perth, and says unit values rise as houses become unaffordable.
Joe uses what he calls FAB: fundamentals, analysis and boots on the ground. Fundamentals include infrastructure, jobs, lifestyle and who lives there, such as Toowoomba’s $1 billion hospital upgrade. Analysis covers data and short-term supply, for example 500 new dwellings coming to an area of 2,000. Boots on the ground means visiting, because he has seen areas with strong data where shops shut at 3pm. He says a $1,000 trip is worth it.
This is general information from the podcast, not financial advice.
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