Property Hub - Investment Insights & Inspiration - Realty Talk Vault: The real rental growth story

Episode Date: March 22, 2023

We bring you another classic Realty Talk episode from the vault, which was originally published on May 25\6, 2022, but is still just as relevant today. What has behind the big growth in rental costs over the last decade?   Has it been more severe in the cities or regional areas?   The fact might surprise you as Simon Pressley discusses the rental stats and housing supply issues of the last 10 years. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.  Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome back to the show. Our special guest is Simon Presley from Propertyology, Bushy Martin and I talking to Simon about what he's noticed and some wonderful information here too, Simon. Thanks for this. Let's bring up our next graphic about the annual change in asking rents. And this is based on three bedroom houses. Yes, it is. So across the, I'll talk about that graphic in a second while people are looking at it, but across the decade, median asking rents in Sydney increased by just 10% in 10 years. So not much growth at all. Melbourne's not much more, 20% across the decade. The median asking rent today in Perth is 10% less than the start of the decade. Hobart's had the biggest increase in asking rent up 57% across the decade. A bit of a sample of what's happened in different parts of regional Australia. Bendigo, a 40% increase in rent. Sunshine Coast up 52%. Same as Dubbo up 52%. Ballinan, the northern rivers of New South Wales up 67% over the decade. Launceston, 69% higher

rents now compared to 10 years ago. Wangaratta, most people wouldn't know where that is on the that rents are 73% higher today than at the start of the decade. Most of the increase in rents has happened in the second half of the decade, which is that graphic you've got up there showing the when I say asking rent, so something's advertised now, we see right across Australia that there's been large increases. This is looking at the annual cost to rent, large increases over the last five year period of time so um to rent a three-bedroom house for example in Cairns now you'll pay five five thousand seven hundred dollars more rent this year than what you would have five years ago um some other big ones there Port Macquarie eight thousand dollars more to rent

a dwelling there now so on the west um you're very up and down always is in places like Port Henlon and Karratha because it's a one industry economy but if you look at a place like bustleton in the southwest of western australia it's nearly seven thousand dollars more per year to rent that house now than the same than five years ago right throughout regional australia you can see the rents have increased a heck of a lot more than seven out of eight capital cities the exception being hobart and the reason for that the cost of rent is is determined by how much rental supply is available rental supply is predominantly the actions of a property investor if a property investor doesn't purchase a property they're not adding a property to the rental pool

now largely property investors don't think regions when they think investing they think their hometown or if they're getting a little bit adventurous and they think of investing somewhere in their hometown it's usually a high profile capital city so they continually add into the rental pool and and the forgotten cousins the regional locations often don't get thought of so they're not adding some rental supply to it and that puts a lot more upward pressure on rents and then an event called covid comes along and people want to escape to the regions and there was already a heck of a lot of pressure on rents in most parts of regional australia in 2019 then we get the single biggest volume of movement in human history that's what covid did um and now

we've got our rents just going through the absolute roof we haven't invested enough is is the moral of the story there. Yeah, very foreboding warning signs for what's about to happen in the future, which we'll talk to you about shortly. But just to sort of round out the picture then around the last decade, what's changed as you've seen it in relation to

the quality and quantity of real estate information over that time? Yeah, it's been interesting. I love this question when you sent it through to me, Bushy, forcing me to think back at the start of this decade, I think printed newspapers were still pretty popular. I used to still get a lot of flyers from real estate agents in my letterbox that was a common form of communication that's been replaced a lot by a plethora of online stories that we've all

become used to I remember at the start of this decade I was frequently on mainstream real estate tv shows whether it's sky news or channel 9 or channel 10 they all got axed progressively over the decade and have been replaced by you know you led the way with that with digital tv and podcast you led the way at the start of the decade i don't think i'd heard of podcasts um you know if it wasn't for yourself i wouldn't have heard of podcasts um you know now it's a common and very popular means of uh of communicating um there's a lot more opinions now i think that's just the digital world that we live in um everyone's got got their own platform their own facebook page or their own twitter account so everyone's got an opinion uh and

therefore everyone thinks that they're an expert there's more information available about real state now a lot more reports a lot more data but what we don't have more of unfortunately is more wisdom because we've got more opinions people think they've got knowledge because they've got a voice but i'd actually argue it's uh it's diluted intelligence not not enhanced it that there is more information available but we're not consuming we're consuming more poor quality information that's been the problem and where we're going to go over the next decade do you think what's your view on that for information yeah well i think you know data is the new oil isn't it um you know i i'd love to think that there'd be um you know clever cookies out there working at all

different metrics different things we could measure uh personally one of the things i would love to see kevin would be um the frequency of data especially property specific data the core logic stuff of the world um there's a four month lag on that you know in this day and age i still to understand how it can take so long for those numbers to be published. So, yeah, but the technology is there. It's just a matter of how quickly can the human brain, you know, be creative and innovative and come up with new things. But the digital way of delivering messages, you know,

that's not going away. Yeah, brilliant. Well, while we're on the subject of the future, if we're looking through the front windscreen now, I'd love to get your thoughts on what's likely to change in both the way we live, but also its impact on property in the decade ahead. Well, I think we're going to see forever and a day that property will remain the world's safest asset class. It is shelter at the end of the day. It's an essential commodity.

You know, three out of 10 dwellings, you know, every year for the last 60 years, three out of 10 dwellings have been rented. i don't think um i don't think that that's going to change um whatsoever i think we're going to um particularly since covert we've all responded differently to covert but the way we live there's definitely been some structural changes um that i've enjoyed observing them unfold over the last couple of years we put greater appreciation for for much of the last decade there was an insatiable appetite to be living uh with things at our front door you know the high-rise apartment that we were talking about earlier so that we can just literally walk downstairs and go to a restaurant and go to a cafe or walk to work or something like that um the impact of covid um

we're now embracing technology we want space more than that living in that confined space the high-rise apartment we want space we don't just want houses we want we want acreages we want big backyards we want um fancy swimming pools we want to create our own oasis um we've got netflix we got um online shopping we've got uber eats we now just pick up the phone or grab the internet and things are delivered to our door now and that's that's been the biggest change that i've observed since covid that's the new norm you know there'll be a change somewhere down the track um but for the next decade as far as i can anticipate now that will be the single biggest change home is our oasis um is what i'm calling it the lifestyle movement yeah you've touched on

rents before and that situation's only getting worse what what's your view of the future in that regard and and what needs to be done about it uh what needs to be done about it i guess um i don't have any confidence this will happen unfortunately because the people in the higher places their uh their actions haven't been suggesting that they've been listening but we need to think about what actually caused it is a rental crisis um i love australia i'm proud to call myself australian But one thing I'm horrified is that in a country of 25.7 million people, one of the richest countries in the world, and we've got good people with good character, good rental histories, stable incomes, good financial discipline, and they are living in tents. They're living in caravans. Now, that story is not an exaggeration.

That is widespread. That is happening all over in Australia, and it's happening a lot more outside of our capital cities than inside it. What caused it is people don't like talking about this, but if you want to know the truth, it's politics. is what caused it federal state and local rental supply is the action of a property investor investing is a discretionary action you do not have to do it to do so requires financial discipline and a preparedness to take risk in investing in your own financial future when someone walks around with big baseball bats going whack whack whack whack whack that discretionary action you get less participation so whether it's a tax policy whether it's a let's change a rental policy

let's take um a privilege away from the asset owner and put it in the hands of the person who's renting all these things let's make it harder for that investor to get credit all these things have happened over that decade we look at in some of those graphics earlier so there's been a significant reduction in the amount of investor participation throughout the last 10 years investor participation is where rental supply comes from 85 of every rented dwelling in this country is owned by an everyday aussie property investor not not a government but the government decisions federal state local have diminished it so until they you know actually put their hand up and say we made a few decisions that we regret we recognize that we are we've caused this problem um investors don't

need red carpets they don't need handouts they don't need cash running at them what they just need is clean air and even given clean air this mess will take years to recover years my fear is what happens in the interim that family living in a caravan or a tent what happens there's nowhere to live the person who currently does have a detached house but their rent's gone up by 200 bucks a week over the last two years what happens when that lease expires and the landlord goes well sonny jim it hasn't always been roses for me but now what is i'm going to make hay with the sun shining um you know the rent's going up by 50 bucks a week you can't deprive the investor who's taking the risk from doing that and if you do that investor will sell so the problem gets worse

right so if you don't pass that legislation which you shouldn't um then the rent goes up so that person i can't afford that now so now we've got someone else living in the caravan well the other thing that i think is going to tip petrol on that whole exercise as well simon is uh the fact that you know we've pretty much closed the borders and locked the place up for the last couple of years we're now starting to open them there's going to be potentially a big influx of people given how attractive australia has become relative to the rest of the world what what impact is that going to have uh enormous and look we do need to um now that it's safe to open up the international border we absolutely need to encourage overseas migration as we're having this discussion bussy

we have 430 000 jobs advertised in this country that we cannot fill today 430 000 jobs it doesn't matter what industry you work it doesn't matter what town or city you have a business in you have a job or more one or more jobs advertised now and no one living locally to fill it now that's a good thing um in one respect because we've got a really strong economy the the full house sign is up for our economy which is great for property markets it'll be great in the not too distant future for wages finally we'll get some some wage growth because we've got lots of jobs and no um labor supply to fill it but so we open up the international border we're inviting all this skilled labor to fill these jobs again great for the economy but where do they bloody live

the 25.7 million people who are here now they're living in tents and caravans i'm not exaggerating now pre-covid we we used to add about 200 000 people per year from overseas migration what do we do if we just add six months of that a hundred thousand extra people where are they going where are they going to live yeah it's it's it's scary stuff i i fear that we may end up seeing a side of a country that we've never seen other other countries around the world we've seen before civil unrest interesting well i mean there's despite that picture i'm hearing a wealth of opportunity for property investors moving forward what's your take on what the opportunity will be absolutely a lot of commentary recently because we've had our first rba increase

in 11 years about oh property prices all doom and gloom yeah it's the same commentary we've heard when the international border closed oh yeah no population growth property prices are going to crash and yet you know the two following years were the biggest boom second biggest boom in our history um so what we've gone with uh interest it's it's inevitable we'll have more interest rate rises right so instead of going we're going to have dirt cheap interest rates going to a 15th more than dirt cheap but they're still going to be dirt cheap right um but we've got an economy that's at full house we've got infrastructure boom that's the greatest thing this country's ever produced um there's no there's no job vacancies anywhere we've got an all-time

officially an all-time record low supply of properties for sale and for rent these are incredibly strong an incredibly strong underbelly for property markets yep incredibly strong um all the rba rate cuts will do is think of it as the accelerator so the things i was talking about earlier the foundation or the motor that drives the property market the things on the supply side the things on the economy side we've got a really really strong motor the RBA is the is the accelerator pedal right so that accelerator pedal until last month or earlier this month has been bang on the floor we're going fast right and progressively the RBA is is lifting you know not putting as much pressure on that accelerate pedal so um it's it will control the rate of

growth but we will still have perhaps with the exception of sydney and melbourne we will still have growth and in large parts of australia i'm very confident um we will see deep double digit growth wow incredible um you know what a session simon we're we're out of time mate unfortunately we're gonna have to go but um thank you so much for your time simon and thank you also for your support over the last decade lots more to come i hope my pleasure gents um i want to thank you all uh and congratulate you all you know 10 years is a fantastic achievement 500 shows you know i've got a great appreciation for the amount of work it's not just the time that you're on here but all the work you do behind uh behind the air ignore um you know organizing um speakers and

that sort of stuff i've enjoyed being part of it and i want to wish you well for um the future success of this great program thank you mate we're going to have you on long before we do our thousandth good on you simon thank you um stay with us we'll come back in just a moment bushy and i will give you a rundown on some of our takeaways from what simon has given us uh in this show stay with us this is real estate talk no it's not it's realty talk i'm so used to saying that this is realty talk we'll be back again in just a moment fantastic good mate we'll let you I'll just stop recording.