Suburb Trends November 2020 | University towns: Investors dream or nightmare?

How have university towns held up during COVID and will there be a shift in what properties sell?
In this edition of Suburbs Trends, Kent gives the scoop on the current state of university towns and feeder suburbs. With the majority of international students returning to their country of origin during the beginning of COVID Australian university towns especially in Victoria have suffered the consequences with high unemployment, low property prices and skyrocketing rental vacancies. Will these regions bounce back and how will it happen?

Here’s what we covered:

• How will zero overseas students in Australia impact university towns?

• Will reduced overseas students lower property prices?

• Why is Newcastle such a hot area?

• How have the surrounding university suburbs been impacted by Covid?

• What 'property fads' should investors and home buyers stay away from?

• How have Victorian suburbs been impacted by the drop in overseas students with 7 out of the 20 top universities residing in VIC?

• How many units are hitting the market and is there likely to be another fire sale of poor cheap assets?

• How have the developers targeted their marketing towards Chinese investors?

• Why landlords of new property can’t differentiate their property besides dropping rent.

• What are the lies of 'building subdivisions' and getting a greater yield?

RELEVANT EPISODES:
Suburb Trends October
Suburb Trends September
Episode 124 | Brendan Coates

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HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded on 19 November, 2020.

Veronica Morgan: This is our suburb trends report for November, 2020. And we'll be looking at where prices are moving across the country, either up or down and why they're moving in this episode, we're focusing on uni towns. Kent Lardner has been busy crunching the numbers, creating heat maps, and other geeky things. To help us build a picture of what the reduction of overseas student numbers is doing to the property market.

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker. On the time before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free full forecast report, which experts can you trust to get it right? The elephant in the room.com did I use,

Veronica Morgan: You have to be living under a rock to not know that there's been a huge reduction in overseas students living in Australia as a result of COVID the 20, 20 academic year never really got off the ground. And the knock-on effect was an immediate and marked increase in rental vacancy rates close to the larger universities. And we certainly saw it in Sydney with the CBD vacancy rate, rising from a long-term average around 3% to pick up almost 15% in my, and today it's hovering around 12% while international borders remained closed. How long this will last for is anyone's guess, but is Sydney representative of what's happening across the country Kent, before we look at specific areas, can you explain how you've looking at this data?

Kent Lardner: Hello, Chris? Hello Veronica. Yes. The the approach was started with a map. I was doing a map based on what we call a statistical area to about two or three suburbs. And I was doing this across the country and I found a couple of blips and the blips that DACA patches were a couple of universities. And that really led me to dig a bit deeper and find out that there was in fact, a much higher vacancy rates in and around the universities across several States and across several cities. So obviously there's been a lot of headlines supporting this, but it started with just coincidental finding a map with some, some dark patches on it in and around Newcastle and, and up in Armadale in Northern new South Wales. It's the starting point.

Veronica Morgan: Well, that's quite interesting. I was going to sort of start off or kick off with Victoria, but so Newcastle and Armadale, what else? I mean, dig a bit further for us and help us. What sort of property, what sort of suburbs, what sort of vacancy rates are we talking? What's the impact?

Kent Lardner: So I think Ahmed has a great case study. So there's slightly higher unit number of units up in Armadale, slightly higher than your typical comparable town in Northern new South Wales. Now Armadale has about 40% rental tenure. And it's unit inventory is not high it's housing in, poetry's not that high, so it's quite a good housing market, but the standout is Viking too. Right? So it's up, up around the 4% Mark. And so obviously that was that just stood out because the surrounding regions are all extremely low inventory levels, so, or sorry, very low vacancy rate levels. So all, all it took was a slight uptick in that vacancy rate for it to stand out comparative to the other towns and suburbs in and around Armadale.

Veronica Morgan: And that unit stock you're talking about is that specifically been built for student accommodation.

Kent Lardner: I don't have that answer, but typically in most of these locations, you'll find your units. Are you, you go to for a lot of these student accommodation, there's one call out to that I'll find when I analyze a lot of these these vacancy rates for Unity's, sometimes they advertise just the room and it's the room being advertised, not the entire property. So it appears when you count it, it appears and looks like a one bedroom unit, but it's not, it's just a room in a unit. So we we've, we factored that in, but comparative to the other areas it's standing out. So yeah, certainly the, the rental tenure up there is a bit higher, obviously. There's not an abundance of, of units or apartments though in Armadale, it's only about 6% of total housing inventory. So it's not that high. And a, an interesting, I found another area, another town that had a lot of similarities in terms of pricing and, and profile, and it was Grafton. And when you compare everything, it's almost the same in everything, except that the standard is obviously the the vacancy rate. We had a, you know, 3.7, seven up to 4.2, 3% vacancy rate in Armadale, whereas it's below 1% in Grafton. So it's a stark contrast.

Veronica Morgan: And you mentioned Newcastle as well, but apart, and we'll obviously elaborate that in a minute. I know that's really close to your heart, but yeah, the Newcastle note, anyone listening, if you haven't listened to every single of our Ste suburb trends, episodes, Newcastle features in there somewhere, why would that be with, with that other, other regional towns that are university towns that you have been, have really been standing out, or is this more a capital city thing? I'll look at

Kent Lardner: Capital city thing. So if you go through the universities in and around the capital cities, they also have a very, very high density. So there's a lot of units in and around them. So it's not a coincidence, but it's more stark to see it happening in Melbourne city. It's certainly the case in in and around the university of new South Wales in Kensington there. So you do see it in each of the capital cities where there's a university, the vacancy rates are standout. They are very, very high,

Veronica Morgan: And we'll get to that in a minute and particularly Victoria but quickly Newcastle, where is it showing up there? Because you know, Newcastle's a fairly big town, but it's a city.

Kent Lardner: Yeah. If you look up like Macquarie East was, and has been standing out as the lowest folks to right across the country. So that was the catalyst for drawing up these, the suburban essay to maps. It's not that high, but typically the essay too, that contains the adjacent suburb of Jesmond stood out. That's the suburb where all the students like to share houses. So it, it's not over the top high, but it is it is a standout and it was the catalyst for me diving in and realizing that there's a correlation between a university, specifically the universities that have a higher proportion of overseas, overseas students.

Chris Bates: And a lot of people think that it's just apartments, but you know, our strategy and there's all these property strategies out there, whether it's positive cashflow will buying sort of quantity over quality. There's lots of you know, granny flats, there's so many different property strategies, but one property strategy I've seen promoted out there is buy houses and then almost creating boarding houses out of them basically to university students. And so lot people would think that these vacancy rates are just units, but, you know, I've seen clients in the past with, you know, investment properties in Rand, you know, Newcastle university around Jasmine and you know, renting room to room, which I think is a lot of hearts and energy to sort of get that extra yield, which you have to pay tax on anyway, just quit. Certainly my first job was in Jasmine. You have to,

Veronica Morgan: You do well, did you? Okay? Let's look at Victoria. We can anticipate there, but rental vacancies have been the hardest hit purely because of their extended lockdown. But I also noted something interesting about their share of the overseas student market and out of the top 20 unis for overseas student numbers, Melbourne based unis made up the lion's share. We seven out of those 20. And to put that in perspective, Sydney, Brisbane, or had only three each in the top 20 least. So have you seen this play out in the data?

Kent Lardner: Absolutely. So obviously a few things compounding it. You had a lot of supply, a lot of over supply of, of units in and around Melbourne. So you've got supply issue. But equally you've got the fact that somewhere like RMI, Tina, I think this data might be a couple of years old, but I'm sure it's still going to be very similar. Our MIT had overseas students up around that 46% Mark. So that's pretty significant followed by 34, just over 34%. So we're talking big numbers. And overall though, the Sydney morning Herald had an article a couple of weeks ago. It stated that new South Wales, it overall lost 80,000 overseas students followed by Victoria losing 67,000. But I think what you'll find in Victoria is that very concentrated in and around the city.

Veronica Morgan: Mm yeah, it was quite, I read that article and I actually traced back to the the source of their data, which was actually a recent research done by Victoria unis Mitchell Institute, which shows that we're 210,000 students down and what was expected this year. And they're predicting that we'll be losing half our student numbers by mid 2021. And in the report, you know, cause you're going to talk about a few suburbs or one of the suburbs that you have highlighted talk about today is Clayton. They've highlighted in their report. They're saying that reduction in student numbers of 4,020 the vacancy rate a year ago. So it will September, this was dated September, 2020. So, so 10 month, 2019, the vacancy rate in Clayton was 2%. And the impact of those 4,000 odd students has resulted in a vacancy rate of 7.8% September this year. So, you know, it's quite a significant change obviously. I mean, and this is, I guess the problem. And you do hear a lot of people. It's like a lot of people come to me. So surely you could. She bought an apartment to rent in Randwick, you know, as close to a hospital in uni. And it's like, well, this is, this is where that the floor in that logic comes out loud and clear, doesn't it?

Kent Lardner: Well, it's, it's almost a King to the same as a single industry town. Yeah. I think we'll, we'll talk about muscle book a little bit later, but it's the same thing. Know over dependency on one industry.

Chris Bates: Yes, you might have demand, but you know, you need supply to be limited. So you might have strong demand. There might be that they were working in the hospital in the uni, but if you're just going to keep on building apartments there, then yeah, it doesn't matter if you've got strong demand if you've just got increasing supply. So I think that's where that logics falls through

Veronica Morgan: Case in point here, actually, because further in that report it does highlight South bank and Docklands. So this is exactly what illustrates exactly what you're talking about there, Chris, because of course they've, you know, had huge vacancy rates. So South bank, September, 2020 vacancy rates, 16.8% and Dockland 17.4% huge. However, the student numbers are really small, like in South bank, there are only 1500 that has been reduced the reduction number. And in Docklands, it's not even a thousand, it's 930 in reduction. So those smaller numbers of students have had a massive impact on the vacancy rate. South bank has like four times higher than it was a year earlier. And Docklands somewhat similar sort of actually it's more than five times higher in Docklands on the back of very small number of students. So it does show that that supplies the issue.

Chris Bates: Yeah. Most coming in those areas, right? They're not, they're still building into homes.

Kent Lardner: So building a supply issue, you've got obviously the unemployment issue, which would be concentrated in the town. A lot of those workers in the hospitality industry are not there a lot of the workers in the university. So significant changes to those CBDs, the high density locations,

Chris Bates: The big worry here is that the vacancy rates of say 15, 20%. Right? And so if you have to, if you're a tenant leaves right now, and you've got an investment property in Docklands or South bank, which hopefully you don't, but there's, you know, they're all owned by someone and your tenant leaves and you've got to rent it out or there's gonna be a lot of other apartments on the market. So how do you differentiate your product and get it rented out? The only way you can't, because it's a bog standard apartment is drop your rent. And then all of a sudden, everyone suffer fire sale on rent. So rent will probably be dropping dramatically as well because people will be getting desperate. And if you think about these mortgage you know, payment holidays, and they're all sort of kind of going, you know, pivot going back onto payments, but these are the people who will be trying to extend their payments or the investors that are in these type of apartments because every lock will, haven't got a tenant. I can't rent it out. I had a tenant for six months.

Chris Bates: Yeah. And this is what the vacancy rate really means is the investors behind that are going to be struggling to get their rent, pay their mortgages. And potentially when that those are, they can't see a light at the end of the tunnel, they'll rush to sell it. And so not, have you got a fire sale on rent, but now you've got a fire sale on assets and that's when you stop saying potentially a big cross falls, which probably already have happened. To be honest, it's probably not something that's going to happen,

Kent Lardner: Chris. That's why I like to actually present the count of how many properties there are over 21 days. So that puts it into that takes it from a percentage to a rule number, which represents how many people are hurting, how many landlords are hurting. So suddenly you get up into the hundreds, if not thousands in some of those areas. That's a lot of people without an income.

Veronica Morgan: So what Clayton, cause you sort of, that's near Monash university, right? And then there's Hawthorne is Swinburne you've you've focused particularly on those for this report. And we've obviously just touched on Clayton there, but what numb what's. So what's the, you know, we said the vacancy rates September, 2020 was 7.8%. What is the number of properties sitting on the market that had been there trying to get a tenant for over 21 days?

Kent Lardner: Well, Hawthorne's a good example. So Hawthorne postcode three one, two, two last count we had a vacancy rate of 10%. So that's you know, more than double what it was six months ago and account of 400, four, zero, zero properties listed 21 days or more one suburb. And you know, a lot of people buy more than one. Yes.

Veronica Morgan: So some of these, you know, spruikers and their developers go on their big marketing thingy and people think, Oh great. And then, then also they spread the word to their family cause such a great investment. Isn't it? So you would imagine that there's, some people are hurting more than others, but that's 400 individual units and probably less than 400 owners, but you know, at, at best 400 owners it could be, there would be less

Kent Lardner: That's that's awful. Yeah. And then, and then a spinoff of that, you've got the leasing agents, you've got the strata managers, you've got a lot of industries that rely on that income as well.

Veronica Morgan: Yeah. Good point. And what about the actual inventory levels for sale? So how many of these are sort of hitting the market trying to offer

Kent Lardner: Yeah. Unit inverse inventory still low. So I think Chris, you mentioned earlier on that prices you know, rental prices will, we'll have to have to adjust and just recapping from the last couple of shows. We covered off that inventory levels and vacancy rates are high in these suburbs, but the prices haven't followed so that correction hasn't followed yet. But it has in, in, in around Sydney. So Sydney has made Justments to prices in both, both the for-sale both rental making adjustments to these lead variables of both inventory vacancy. But it hasn't necessarily happened yet in, in and around Melbourne.

Veronica Morgan: Interesting. I mean, because you you're talking about Sydney, but of course this isn't widespread is that you're talking about university impacted areas, right? So you specifically looking at sort of the areas around UTS as inner city, sorry, Sydney uni, but also new South Wales uni, which is Kensington. And also I thought it was interesting to go and to that report put out by Victoria uni as well. It also showed some interesting maps showing where the two biggest student groups choose to live in Sydney. And so Chinese students were favoring areas like Kensington, the CBD while Indian students were heading for the Hills. And so that was sort of, you know, because we haven't asked you actually look at sort of areas such as, you know, that castle Hill and out beyond Kellyville that sort of way. And so I'm hitting you with it without actually preparing it,

Kent Lardner: Pull back to my Rouse Hill. Well, there you go.

Veronica Morgan: Yeah. It's probably, yeah, there could be some links there potentially. So, but what are you seeing sort of around that Kenzie tin area in particular?

Kent Lardner: Yeah. so the inventory level in terms of, you know, fire sale type properties for units doesn't, he's not happening. Kensington was called out before COVID is one of the hotspots I remember by mr. Driscoll, I think one of the CEOs of one of the larger, real sacred heart, it was picked out as, as a hotspot Kensington for both units and houses. So it was that and all the nubs just pre COVID and everything stacked up. And so I would have totally agreed. But what's happened here. So housing inventory still low, but it has crept up. So it was extraordinarily low, 12 months ago, you know, below two. So you could hardly find a property. I jumped up to about four months of immature now, still very, very low. And when you work off low basis, you know, those numbers are low. When you say houses, you're talking houses versus apartments. So then when we get onto the, the units it's still, it's just over three months of inventory for apartments. So it's, it's you can't say at this stage that there's been a flow on effect from properties that haven't been rented and people panicking and flogging them off.

Veronica Morgan: What's the vacancy rate and what's the amount of properties. Yeah.

Kent Lardner: Yeah. Kinzer Kensington showing that the local vernacular 138 properties 21 day in the rental space, that's a lot in, in a percentage terms at 7.34, so it's over 7%. So it's high, very, very high. The question is though, how many of those are owned outright or how of those have really low mortgages? So people can hold firm and wait for that big surge. It's going to happen by 2025 where the statement is that we're going to overtake the U S and UK and Canada and overseas students.

Veronica Morgan: So I'm going to go out on a limb here. I'm completely unresearched. So it could be held down if I'm not making enough and just putting out, you know, there's all these sort of thing about this, all the Chinese money, the Chinese investors, blah, blah, blah. They're buying us out out of home and house and home, and they're pushing prices up, et cetera, et cetera. However, a lot of these new developments have had been specifically built and marketed, targeted to the Chinese buyer and particularly in that sort of area. Right. And, you know, had some Chinese clients, you know, I remember not from mainland China, but Chinese who had used to live in mainland China that live here and, you know, and I'd asked him why, what, he's going through the mind of a Chinese investor when they're buying here. And they're like, well, this is seen, as you know, is a commodity, these sort of properties.

Veronica Morgan: They don't see them as, you know, the way a local buyer would see them. And so therefore the way in which they'd been built and the finishes and all that sort of stuff there, hasn't had to been at the same sort of attention to detail. Should you say, because they buy with a different mindset. Now, if they've been buying and if there's true that there's all this money from middle-class China, there's actually been buying these properties outright. Well, it's fair to say that they don't need to sell them and they don't need to rent them out, even because they might've just been there. Who knows. I mean, I don't, I, as I said, I'm hypothesizing here. I might be completely off beam. It might be that the kids aren't out here at university at the moment. So therefore they have put them on the rental market and no one's taking them up. I mean, do we know anything about that?

Kent Lardner: That's an interesting point. You know, spent a lot of time up in China and got a lot of Chinese friends. So I talk about this regularly and there's, there's really two types of universities, students, Chinese university students, those from the wealthier families and those that are from families that are just doing everything. They can describe every cent and put their kids through uni that university over here. So there's, you know, there's, you can't assume that it's just one wealthy set of, of families sending their kids here. So that's number one. I think number two, it's a standout thing that I learned a lot from traveling and working up in China was the amount of properties units that were acquired, but they weren't fit it out. So it's a kinder buying vacant land. So there's no fit out. It's just an empty shell and they hope it's just a place to park your money. So that, that is an attitude that does spill over into Australia.

Veronica Morgan: Yup. And that could be one of the reasons why we're not seeing an influx of stock on the market, but then again, they're not going to bother renting a place like that out. So it's not going to hit the vacancy rate, is it?

Kent Lardner: Oh, well, no, here it's a slightly different it's, you know, but what I was trying to say, and I didn't say it, or should have was that they take a very long time long-term view, you know, there's not going to be that panic and equally if they buy it and they are from that wealthier background they're not going to be drawn into a short term fire sale because they are saying the market's crashing. It's just not going to happen. They will help. Yep. Interesting.

Chris Bates: Problem with Kensington now, it's not just, there's a freeway with the road that is, but you know, on the other side, you've got green square, Rosebery Alexandria, Waterloo mascot to the South, you've got botany, you've got Randwick, you've got and all of these areas, they're building lots of apartments. And so you know, and, and they're all a Stone's throw away from that university, you know, a bus ride that's five minutes or you could even walk. So I think while the university's there, I think the students will be spread out a little bit in that sort of area. And so Kensington might not have jumped as much because a unit supplies probably a little bit smaller than going square or raspberry, you know? And so I think these, this, this all kind of spread, but it's the, you know, those, those students were renting something and they were probably renting apartments in those areas.

Kent Lardner: While we're throwing around hypothesis. My hypothesis hypothesis has always been that we build new new areas like green square. And then suddenly you get an influx of people who are all buying at the same time, pushing up the percentage of people with mortgages. So very different, these established areas where you might get one new building every 10 years or five years or whatever with with some green, with some infill. But these greenfields areas that suddenly, yeah, I've got thousands of units going up in one fell swoop. That's my hypothesis is that when things go bad, it goes bad in, in one, in one go as well. You get a flurry of stock at the same time.

Veronica Morgan: Yup. Yup. Which is the whole problem that we talk about every single episode. Now we've got, we've actually got an episode dedicated to the Perth market coming up in a few weeks. And we did ask you Kent to take a look at the situation there while you're doing the university research. So tell us what you found.

Kent Lardner: We did have a look at the university over in in Perth and in, and or that was Curtin university. And, you know, without, it's not a coincidence that in and around Curtin university, there, there was higher, much higher vacancy rates there. So, so yeah, again, it's no different to whether you're in Queensland or Perth. So in and around there, so you had to two universities I think in and around Perth, you had one on one side of the river. So you've got I'm trying to click curtain university on one side. And the other one we looked at was the university of WWI. So not over the top in terms of number of listings over 21 days. So the, the essay to Bentley and Wilson and James was 62 properties over 21 days. And in and around the one that's the university of Western Australia that essay to his Netherlands.

Kent Lardner: Dalkeith if I say that correctly in Crawley and that, that had about 65. So it's not, not, not a bad situation, certainly by comparison to to Melbourne overall we, we, we picked on a couple of John moving out of that kind of rental centric, high density review into more of the suburban view of person, the spot that we looked at, I wouldn't call it a hot spot, but I would call it one to watch because it does look like it might be warming up is a place called Belden, a suburb called Belden. And it was interesting because it it peaked back in 2014 at around 519,000. So it's a fairly affordable suburb relative. And it's dropped since then. So that longterm median is down in a fairly stagnant, flat market for the last 12 months, but there has been some interesting signs. There might be some green shoots there. So inventory has dropped down so 12 months ago it was about five and a half months of inventory. Now it's down to around two months of stock. So, you know, properties are coming on and bouncing you know, within 50 to 60 days. So it's relatively warm, a warming up and it's one worth watching.

Veronica Morgan: Now w the episode we've got coming up on Perth, and it's a bit of a spoiler alert. There's some ask some green shoots and we get some on the ground, good analysis from Damian Collins as to why, and when this started to turning around as well. So keep an eye out for that listeners if you're interested in Perth. But when I actually looked at this building, cause I'd never heard of it and it's, it's in an Erika June. Delap right. And yeah, which is just give us a quick idea about exactly how close it is say to the CBD

Kent Lardner: It's. I think it's about a 20, 25 minute drive, which in Perth terms, I think is a long ride, Not, not far from the coastline, but I guess that's pretty much the whole of Perth and surrounding suburbs are most of the, they just go up and down the coastline.

Veronica Morgan: So, and we did talk about that with diamond gold as well. So as I said, if you're interested in Perth, definitely tuning, we got really into the nitty gritty, but what I, what I found when I, when I quickly looked up on, on line and said, well, okay, what's, what's for sale in, on at the moment 19 listings. So not a lot. And what I really saw though, our heavy promotion to grant territory, you know, first home buyer grants, and then I sort of dug a bit deeper and it seems to be that there's a lot of knock-down duplex, subdivisions being offered. So it's like down the track that inventory could site going up, if all of these get sold and actually new properties, you know, everyone that's sold to pop up, you know, so that might change a bit, but it was just sort of interesting to see that that seems to be the rule

Kent Lardner: Thrust of it. Look, the standout for me though, is I wouldn't be worried too much about duplexes here and there because it's not going to be a massive increase in supply. And when you consider there's hardly any units or apartments know only 6% strata top be at turnouts and build up. So pretty much an area dominated by freestanding houses.

Veronica Morgan: Mm. And if the zoning is such that it keeps that, that density really low, then, you know, just an interesting, interesting,

Chris Bates: There are pockets though, where we've spoken about on these, some of the trends of where duplexes are prolific when they should be houses. And so on that double income, you know, why buy one house when you can buy two for the same price? It's kind of the pitch. And there, you know, for example, around the Logan area in Queensland there you know, you can get a better yield if you do it this way. And the problem is, is you increase the only way to get that yield is actually rented out. But if there's lots of other duplexes doing the same thing, just like apartments at rent. So for our listeners, you know, I'm sure they'll get it, but the property markets are unregulated. So, you know, it's not till you bought that place. And then it's built, you know, 12, 18 months later potentially that you have the rental problems. And you can already say they've problems before you signed that contract, go and actually look and fact check the developers don't even do that. Just walk out the door. But anyway,

Veronica Morgan: But also, I guess if you and small developers, you know, like investors are getting a little bit, a little bit confident and say, right, my next investment is going to be a small development subdivision. You know, it's small risks, can't be huge and all the rest of it, but if they've never done it before, it can be ah, highly risky. 

Chris Bates: We spoke about the Perth podcast with diamond. And now the sport that we talk about that exact point which is don't want to play in the development space. Cause it's how much, you know, what you're doing. And Damian's pretty bang on said that. So yeah, we'll leave that for the birth. And so

Veronica Morgan: They can, can we know that you, you picked a suburb from Sydney, one from Melbourne, one from Adelaide, one from Darwin. So which one you want to hit next in terms of our wall?

Kent Lardner: Yeah, well, I'd probably say I'd classify Eltham in Victoria and Warrandyte in Victoria kind of the side by side, very closely together. I'd certainly call those our hotspots. They they, they're not cheap. The median prices will for Warrandyte it's around $1.1 million. If you're looking to buy something at the moment in about $970,000 in Eltham. So fairly expensive areas, but the standard, as well as that, the advantage disadvantage, decile rank it's up it's team. So it's a well to do suburbs they're leafy. They're beautiful to look at. If you're going to look at the suburb profiles on REI or domain, and you look at the look at the listings photos, they're very pretty straight. So in terms of the rental market, there's hardly anything available on the rental space. So there's no vacancy rates are extraordinarily low. And obviously it supports that exit us from the city argument.

Chris Bates: People are, people are wanting to get away from Melbourne CBD and these are on the outskirts. These are on the foothills of the Dandenongs. They're actually more in God's more that way to live out that way now. So they're a bit more North rather than East. But Elsa is exactly that we had a client buy. There are two, three years ago. And they were looking at originally you know, Bayside, like maybe Bentley or something around the Bay. And then I looked, you know, Brown Brunswick and North skirt. And then kind of like trying to, because why you said they're a expensive camp, but for a young professional couple that are on, you know, you know, one 50 to 200, right. That's pretty much why they're buying around that. You know, that circle 1 million in Melbourne, they started getting uncomfortable around 1.2, 1.3 in Sydney.

Chris Bates: It's probably around that 1.5 Mark. For that sort of couple, maybe only a bit more in Sydney and Ellison was an interesting choice for them because when they compared what they could get for their money compared to the other, they were talking a big art deco, a lot of mid century sort of houses. There are massive blocks and you've got a 1200 square meter block for a circle or a million dollars. And so yeah, but it wasn't, it is a bit further on the train. So it's, you know, it's not that you know, 30, 40 minutes, it's, maybe it's closer to an hour. And so that wasn't really most people in Melbourne didn't want to do that. But what I think this lockdown and Cove has done is people say, well, yeah, I can to get this. I'm willing to compromise, which they weren't doing before.

Chris Bates: So it's a really interesting one to see elf among the list, a home office in one of those big, tall ceiling houses, lots to hate hot school speaks from experience from was Bronte. Just, I had to throw in a Sydney side suburb close to your heart. Obviously, you know, we all favorite, but inventory levels have gone down lower yet again. So even though that the medium price there does jump around a bit by virtue of it being well and truly into the three. So at the moment, about three and a half million dollars, it does bounce around depending on what's for sale at the time, but you wouldn't, you wouldn't read too much into that in terms of price or valuation appreciation. But overall, the inventory levels low, the demand

Kent Lardner: Remind song solid. And if you look at the 10 year REO, it's got a nice chart. You look at the 10 year median growth. It's just been solid that that year on year growth, that long-term growth remains. So it's just that, it's one of those rock solid suburbs. If you've got a bag

Veronica Morgan: And for anyone who doesn't know, Bronte's sort of just South of Bondai and it's a beautiful beach and it's very much, it's sort of, it's not known for being full of backpackers and tourists. It's much more that sort of local you know, some very, very well to do and very, very famous people live in Bronte. And and it's got a lovely park and it's got a lovely feel, a little village, et cetera, et cetera, all the things that Sydney siders love and, and it is a very desirable place to be. And there's, there's a fair variety or a spread of stock, I guess, you've, you've got, you know, semi-detached houses, you know, two bedrooms, no parking right up to, you know, cliff top ocean view mansions you know, and everything in between. So there's quite a bit of diversity and, and apartments. Let's not forget art a lot. Yeah. Your art deco is, but also a lot of those ones have been built in the sixties and seventies. You know, your red bricks, you blond bricks. There's quite a few. Yeah, the walk-ups. Yeah, but it's yeah, there's a lot there, but it's a very, very pleasant Eastern suburbs, very, very sought after suburb.

Kent Lardner: So a lot to love about Bronte,

Veronica Morgan: Ease a lot to love about Bronte. And obviously if you've got property there, you'd love it even more. But if you're trying to buy in, you might be not loving it. So

Kent Lardner: Honda become Debbie downer and talk about some of the the downsides downside suburb. So port Pirie in South Australia, and what I try and do is dig around and just without phoning too many people, I try and do as much desktop research to find out a potential cause for it. But it's inventory levels significantly high. There's a lot of housing stock. That's not really moving. And the only thing I could put it down to the, the, the local government area unemployment rate is high it's it's about double the national average. So that does look like it's an economic issue for Paul period. And in terms of the advantage disadvantage, decile that we refer to it's one. So it's in the lower, the lower the second one I've got on the Debbie downer list is messed up. So we, we, we did cover that a little bit earlier, but right now I count just over 130 apartments for sale and a lot of people, unfortunately, they called that, that mascot unit building mascot towers, right. That's going to carry over and do brain damage to the suburb.

Veronica Morgan: Yeah, it is interesting that, isn't it. I mean, I think just the very fact, there's an airport. There does a bit of damage as well. You just think airport in noise. Not at the moment you could be forgiven for forgetting about the aircraft noise. I'm sorry.

Chris Bates: Pretty neat. The under a flight path right now, though, right? So there's no flights here. This is all good.

Veronica Morgan: Yeah. We, it's amazing out short memories we have, but yeah, mascot towers is obviously terrible, a terrible story and obviously very unfortunately named, but there is a lot, a lot of new development in mascot, a huge amount it's like, and as you know, industrial land has been rezoned and and I would suspect that that's lending itself to these dials.

Kent Lardner: What do you know about lead or just, that was just, that was a little line from the castle. One of my favorite movies,

Veronica Morgan: If it wasn't set in mascot, it should have been okay.

Kent Lardner: I've got one more go, one more suburb, Musselburgh. It's near Newcastle. It's not far away. It is a bit North. It's got a few at the housing. Market's fine, but the units, there's not an abundance of units, but they not really moving. So the unit inventory levels rather high. And yeah, I did a little bit of a concern there. And another piece to be that there's in S in the town itself, there's 900 people directly employed by the mines. And there's a bit of uncertainty around the whole coal thing at the moment. So you know, up there, the, the news article that I just recently read that, you know, the region has about 65,000 people associated with the, the, the coal mining industry and this just this known how many of these jobs will be replaced by the move to renewables.

Kent Lardner: And I wonder just question, I wonder whether that's the cause of these units equally, you know, it's not, not an inexpensive place to buy a house so you can buy a house for around that 300,000 shaken pocket, big four wheel drive. I had a chat to a buyer's agent, tyranny Manning, who I think, you know, I need to answer his answer to this was, well, if I'm a tradie, I've got a big four wheel drive, I've got motorbikes, I've got a boat, I've got a caravan, I'm going to buy a house. So the unit market there has gone a bit soft. And

Veronica Morgan: If a house only costs you 300,000, what's a unit going to cost. And how much is it going to cost to build in the first place? And can they possibly develop a, possibly getting any money out of it? If, if a house is 300 grand, you know what I mean? Like, it doesn't make sense to me that even if you're building a apartments there,

Kent Lardner: Well, they, they're not, yeah. They're little townhomes, but yeah, around the $190,000 Mark but with interest rates, the way they are, you'd rather chop it up and buy the house for 300. And this is the case in Brisbane

Chris Bates: And Melbourne as well. Not so much. It's one of the things is Sydney, why apartments went up versus you know, Brisbane and Melbourne is it house has got too expensive and people cannot afford a house. That's not an option for me earning good incomes and I've got a big, decent deposit. So I'll buy an apartment. And that's what pushed up a lot of the apartment prices here in our premium suburbs, and also not so much. But in Melbourne and Brisbane, those buyers could still buy a house. So you haven't had them going, competing on the art deco and the Nasr print and summers, because people said, well, I don't want to make that compromise. I still want to have the backyard and a nice little frontage, some willing to swap areas. So yeah, in an area where how's this still affordable, why would you buy an apartment? And that's, you know, why would we even build an apartment? So yeah, it doesn't make sense.

Veronica Morgan: Can you had a couple of others that on your list that still looked at before we put this together, as in warm spots, was there Glen side in Adelaide and Lenier? Is it in Darwin?

Kent Lardner: Let me I'm just going to go to my, enter your suburbs search on suburb trends.com and just spell that

Veronica Morgan: Ellie, Ellie, a N Y E R. Now, while you're looking that up and because you had this on your list and I just sort of looked her online and there was 15 listings seek, and this is Darwin. Okay. So let's face it. Darwin has had a shocking time of it over the last decade or so. But I noticed in the suburbs that was on your list that 15 listing six of which were under contract or with a current author, which is quite interesting. There's obviously buyers are active in that area. If you have six out of 15 you know, with buyers on them.

Kent Lardner: Yeah. a lot of just instant search here on the website, it's come up with housing in three, 1.63. So it's pretty low, pretty hot rental 10 years, about 38. It's just marginally higher than the national average. But the advantage disadvantage decile is, is nine. So it's, that's interesting. And that, to me, that there's probably a fair bit of employment in the in the, in the armed services in the air force there. And you know, there's a, there's a bit of, a bit of investment, bit of money going into that sector at the moment.

Chris Bates: Um so I'll probably attribute a fair bit of that to to the force. It's funny too maps go onto the satellite. It's a great tip when you want to figure out, but anyway, you guys submitted straight North of it. So you're talking hundreds of meters, not kilometers and kilometers and kilometers and his house and land package is getting built. And so it's funny, you're right. So you're talking about a hotspot where very low you know, listings and they're selling literally

Chris Bates: Couple of minutes up the road. You can go inside. Yeah. It's not, it's not about in saying that further North than that, then you're getting water. So it's not like there's this proliferation going to happen for years and years and years, but long, the land, lots of land up there,

Veronica Morgan: You Sue to make sure you got enough people for them. And the other one that was on your list, that sort of I think we highlighted, or you highlighted before we did, this was Glen side Adelaide. It's in the inner ring location. It looks like a very, very nice suburb. Only, only 12 listings.

Kent Lardner: I, I did. I printed out that one. I did my proper homework on Glen sites. It's one of those inner suburbs. And I think we covered this off with Adelaide. One of the, one of the issues we've got is you've got the unit market behaving in the same, literally in the same suburbs or adjacent suburbs and the unit markets in strife. But these suburbs with houses, the housing markets are going gangbusters. So so it's, it's very, very strong inventory levels below two. So, you know, you can hardly find anything. Days on market is extraordinary 21 days. So, you know, it's bounce, they're bouncing on and bouncing off.

Veronica Morgan: And this is, this is, you know, across the board, we're seeing this, you know, this two-speed markets units doing one thing, houses doing another, and in areas where affordability becomes a problem, as you mentioned earlier, Chris, I think we can see the knock on effect benefiting the unit market, but, you know, but it does come down to also sheer volume and what's available. Now I can, every month we discuss something that doesn't fit the pattern, you've got an anomaly for. It

Kent Lardner: Normally is the, the price change in and around Melbourne. It hasn't been yet. So maybe next month we might start to see it. But it still might be a couple of months off, but we're just not seeing it. So Sydney, the correction happened, but in Melbourne, in terms of prices, we get to see that early correction, that lead indicator with rents moving South.

Veronica Morgan: And when you're saying correction, tell me what you mean. Because when I think Sydney now it's hot, hot, hot, right. And I'm talking houses, not apartments. So when we're talking auction clearance rates, well in the seventies prices rising. What are you, what are you talking about as a correction,

Kent Lardner: The lead indicator for me, based on the massive volumes of vacancies in apartment space, the high density spots in and around Melbourne yep. On pointing to rents, moving down there as well.

Chris Bates: So yeah, yeah, no, no international tourism, they would want to stay in the city. And so those a and baby, these Airbnb are really struggling. Airbnb's regionally and nice lifestyle locations are going nuts this Within their state. But yeah, that that's going to impact these rents as well.

Veronica Morgan: Well, this has been a great snapshot. Thank you very much. Looking forward to coming back with next month's report, which of course will be December. What should we focus on for next month? Any ideas? Go ahead,

Kent Lardner: Chris, what do you want? What do you want for Christmas? Can we do something around like government stimulus? Maybe? I don't know. I mean, the lightest changes is very interesting. We'll know more by this stage next month is the potential stamp duty changes. I he's, my, my theory is that this is going to create a fix and flip opportunities Arik, and the fiction market for new South Wales will really surge we'll get TV shows hosted by Veronica Morgan.

Veronica Morgan: Oh no, I won't be, why are we touching this stuff actually, interestingly now, because we did talk about, and I have to dig it up, actually we jump aside, we discuss what could happen if the state government shut, Oh, it must be with Brendan coats. That will be it. Isn't it. Where we discuss what could happen if the state government does abolish our stamp duty and you know, and here we are, and this is what they're doing and they're, they're doing the opt-in. So you can opt for paying stamp duty upfront or paying land tax over time. And obviously if you're going to flip, you're going to opt the land tax because you're not going to own it that long. You know, that that's a no brainer. It's also going to lower the cost of, of the, the bird or the hurdle to get into the property market. So what does that mean? Well, I think we're looking for price rises.

Kent Lardner: Well, just by history, we know that if it's a high demand area, a high demand suburb, there's every possibility that we will see a price increase.

Veronica Morgan: Okay. So let's focus on that for next episode.

Chris Bates: Wonderful. The catalyst is, is that what causes the price rise is the person selling putting that money into the bank. Now they might buy before they sell, but let's just say they sell first. Then they go back to a broker or bank, and then they reborrow on their 20, 20 income rather than they were bought that house in 2000 or 2005 or 2010. And so they can generally borrow a lot more than their current debts. And so it's that transaction is increasing their debt. And then on top of their current equity and that's what pushes the prices up. So by creating more transactions, what you're doing is creating one debt and then more debt pushes into house prices. And so yeah, it's and, and people who are willing to take on more debt. And this is a big change that we've seen just in a mindset. And I, I wrote low on this actually post actually saying, once you get onto that 2% Mark, I imagine people will start thinking differently. It's what happened. There was no, sir, no, sir. John was to predict that, but yeah, the mindset's different now. I know I can get a five-year feature under 2%, it's that psychological barrier. So where they will, don't have to pay stamp duty and I can borrow under 2% for five

Veronica Morgan: Years. Why the hell are we staying in this house that we don't love, but sell it and let's go and upgrade. And so that's what I think will happen in six months time, we'll be talking about negative interest rates, July 20, 21. And we might be can before we head off. I'd like to add in, if you can look at Canberra for next episode, because of course Canberra have led the charge with the stamp duty change. It'd be interesting to know you know, what the impact of that has been on the camera market is a bit of a Canary in the goldmine. Yeah. Thanks for listening. Oh, whatever, mine. Just a mine and on the grandma. Okay. Thanks. Thank you for listening. We love to hear your questions and feedback. Connect with us via the website or email us@questionsattheelephantintheroom.com.