Property in Feb 2023 - the positives and negatives

The national prices fall about 10 per cent from their peak – the second-largest slump in 43 years – seems to have stalled in Feb! (AFR)

 CoreLogic’s five capital city index has gone sideways.

Why?

1. Feb and March is the seasonally strongest month of the year in terms of capital gains.
2. The NSW government is allowing first-time buyers to elect not to pay any stamp duty and instead opt for an annual land tax, enhancing their upfront purchasing power.
3. The shared equity plan managed by Bendigo Bank (see link below )
4. Chinese buyers seem to have returned and a huge increase in student migration,
5. There are a shortage of properties and rentals have increased significantly 

However there is still a lot of pain on the horizon

Home buyers with big mortgages are on pain 

Why I think there will be a lot of pain  on those that have taken on huge mortgages on their own homes 

Interest rate increases have yet to hit on  one-third of all home loan borrowers are on fixed-rate products. A total of $350 billion worth of mortgage debt (close to 900,000 loans), will shift to variable rate in 2023. 

 These borrowers  will be smashed by a huge increase in their cost of capital, which in most instances will jump from about 2 per cent to 6 per cent - causing pain 

Inflation is on the rise 

We’ve been spending like it is 1999 and quickly burning through the saving  buffers.

People are spending more than they are earning!

Only 40 per cent of borrowers are less than three months ahead on their repayments. A big chunk of our society is very vulnerable indeed.

High risk premiums are lower than they should be .

The opportunity 

What does rate increase  mean for investors ?

An increase in interest rates are cushioned by tax deductions available and an increase in rentals! 

But ….Purchasing Power and serviceability has crashed  33 per cent to date. 

This could be an opportunity of sharing capital growth with those that have deposits with those that have cash flow!!

Property is still a great investment in Australia, and in my view will continue to be 

It will be interesting to see the governments experiment on partnering with those who can’t afford housing . The shared equity housing scheme 

Maybe investors should take note on what the government is doing! Personally I think shared equity is genius and a win win win for all

The shared equity housing scheme 

Great you tube explaining what it is https://youtu.be/83k8hHbCWl4

Plan for 1 million houses in Oz to solve chronic shortage of properties

Government are planning to release 1 million new homes across Australia to deal with housing, social, and economic challenges facing the nation.

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Rental properties are scarce and rising and property prices unaffordable and unobtainable for most millennials with no help from their families .

According to the powers that are managing  the $10 billion housing future fund, what is needed is more investment from the private sector in affordable housing, , faster zoning, planning and more land release by state and territory governments, particularly around “well-located” state land near train stations and TAFE campuses. 

Challenges 

- low level of experienced local labour

- inefficient productivity practices across construction and bottlenecks in supply chain 

How do you solve these wicked problems ?

'Greenshots' - the 21st century equivalent to the last century's 'moonshot' success. Share  5 areas the industry  MUST focus on to solve this challenge:

1. design buildings and products for disassembly with sustainable, circular materials;

2. shift from product to materials centric operating model (placing materials at the core of precincts and ventures); 

3. deliver products-as-a-service putting responsibility back onto brands vs customers, governments, and citizens when dealing with all forms of waste (i.e valuable resources); 

4. shrink the manufacturing and service via (micro assembly service centre operating model), across each city and region across Australia; and 

5. sustainable, circular finance backed by trusted layer of transparency around materials usage across your network of products, cities, and precincts. 

Some of the things the government is doing

Treasurer Jim Chalmers and the state treasurers to meet to solve these wicked problems 

Up to $500 million a year will be used to build social and affordable homes, repair and maintain housing in remote Indigenous communities, provide transition housing options for women and children leaving domestic violence, and fund specialist services for veterans experiencing homelessness.

Collins said of the 30,000 homes to be funded under the scheme, 20,000 would be social housing, of which 4000 would go to women and children leaving domestic violence or older women on low incomes at risk of homelessness.

Helping  10,000 essential workers such as police, nurses and cleaners enter the property market by co-investing with them 

#constructionindustry #builtenvironment #homes #cities #greencapital #proptech #circulareconomy 

Inspires from  the SMH article: