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5 key indicators of
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The next property boom
2022–2027
1300 766 791 contactus@freedompropertyinvestors.com.au
freedompropertyinvestors.com.au
Disclaimer: Information contained herein is gathered from sources we deem to be reliable however warrant no guarantee as to the accuracy of third party data. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. All rights reserved.
January 2022
Welcome Thank you for reading this report. Freedom Property Investors is not a property company. We are a community of investors accessing the hidden market of positive cash-flow properties located in high growth locations across Australia. Led by Scott Kuru and Lianna Pan, two of Australia’s most successful property investors, we aim to provide our members with investment properties that outperform market averages for both capital growth and rental yield. Lianna Pan is one of only 3,000 qualified Actuaries in the country, and together we have perfected a detailed methodology
covering all fundamental aspects affecting the residential property market. Spending tens of thousands of dollars on our research, we also employ a full-time research team with access to property specific data not easily accessible to the everyday investor. Utilising a wide team of over 200 experts around Australia, we work toward a common goal of helping create financial freedom for our members through property. We hope you enjoy this report and we look forward to helping you leverage our data insights to achieve your financial freedom.
Lianna Pan
Scott Kuru
Founder, Director of Research
Founder and CEO
Australia is on the cusp of what could be one of the biggest growth eras of our history. Those who act swiftly will be in a position to ride the next, and possibly greatest, property boom.
I
n what could be referred to as the ‘Golden Age of Growth’ – the next few years seem set to bring enormous change by way of hybrid workforces, migrating populations, advancements in technology and so much more.
Because of this, more millionaires will be created in the next decade than at any time in Australia’s recent history. With low interest rates continuing to provide affordable lending, there really has never been a better time to invest in property.
These types of changes will almost certainly have a direct major impact on the Australian economy and property market.
Rewind to early 2020 and you’d be forgiven for thinking that a future such as this would not be possible in light of Australia’s first recession in almost 30 years.
Little-known suburbs in areas which have been identified for their growth potential will see massive gains seemingly overnight.
But, as wise property investors know, economic shocks often lead to the biggest property booms.
Investors who are able to find and purchase in these suburbs will enjoy substantial equity increases, allowing them to accumulate more properties and greater wealth during this time.
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5 key indicators of the next property boom 2022–2027
Since mid-2020, the speed of our economic rebound has exceeded almost all expectations, with Australia outperforming many other advanced economies and only continuing to improve. As we predicted, 2021 shaped up to be a very successful year for property values across many of our capital cities and regional districts. Despite widespread lockdowns, closed borders and waning government stimulus, Australia’s residential property market in 2021 recorded the fastest pace of growth in more than three decades. Although it appears that the heat of the most recent property boom has largely subsided, there still remains plenty of room ahead for growth in 2022 and beyond. Some of the biggest banks in the country agree. In fact, Westpac is forecasting a respectable 8% increase in dwelling values in the year to come. NAB, however, is a little more conservative, estimating 5% growth in 2022. Most of these increases are predicted for the first half of the year – and with international borders reopening, this could be even greater than some anticipate.
5 key indicators of the next property boom 2022–2027
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“By making the right moves at the right time – you can literally transform from an ordinary income earner, to a financially free investor in the next 10 years.” says Scott Kuru. The factors that are currently at play, as well as what we can forecast in 2022 and beyond, creates so much opportunity for investors who know where to look. Factors such as low vacancy rates, new construction supply, and population growth all point toward another, if not bigger, boom than what we saw in 2021. “By making the right moves at the right time – you can literally transform from an ordinary income earner, to a financially free investor in the next 10 years.” says Scott Kuru. At the onset of the COVID-19 pandemic in early 2020, Freedom Property Investors Founders, Scott Kuru and Lianna Pan, noticed a clear pattern forming. The pattern was similar to those of past property booms that followed an economic shock. Instead of shying away and taking a ‘wait-and-see’ approach, as many at the time were doing, Scott and Lianna saw the opportunity for what it was and worked tirelessly to position our members to take full advantage of the approaching boom. Sure enough, they were right – and if you’ve been keeping up with our market commentary throughout 2021 you will notice just how accurate our data can be.
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The saying “success leaves clues” always reigns true through data, and as we begin 2022, there are a few key growth indicators that every investor must be on the look-out for.
1. Population growth With international borders reopening, population growth across the country is anticipated to increase along with greater demand. At the beginning of 2020, Actuary and Data Scientist Lianna Pan highlighted that the government would likely use immigration to help boost the economy once borders reopened.
5 key indicators of the next property boom 2022–2027
This would not be the first time that the government has implemented such measures. As recently as the Global Financial Crisis of 2007-2008 the Australian government used migration as a way of boosting our economic recovery. Since the end of World War II, due to a combination of both high post-war fertility and high levels of migration, the number of Australians born overseas has grown from 10% to now over a quarter of our total population. According to the Australian Bureau of Statistics (ABS), Australia’s population in 2022 sits at approximately 25 million. The government projects that within the next 10 years this will increase by more than 3 million residents, more than half of which will be overseas migrants.
Percentage of Australians Born Overseas
Percentage of Overseas-born (%)
30
20
10
0
20
19
40
19
60
19
80
19
00
20
20
20
Source: ABS, Migration, Australia 2019-20 financial year
5 key indicators of the next property boom 2022–2027
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Australian Population Natural Increase vs Net Overseas Migration Natural Increase
Net Overseas Migration (NOM)
300,000
200,000
100,000
0
It is estimated approximately 200,000 international migrants per annum will be entering the country in the short to medium term. This number is projected to remain relatively consistent over the decade ahead. Because of this, Inner City areas may see heightened demand for apartments, which often provide a more affordable entry point as opposed to houses in nearby blue-chip suburbs. This is beneficial for investors in that an increasing population, particularly of highly-skilled and well-paid migrants, will further fuel demand for property in these areas – leading to increased asking prices and stable rental returns.
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5 key indicators of the next property boom 2022–2027
1 30 20
29 20
Source: Australian Government, Budget 2021-22 population projections
-3
0 -3
9 20
28
-2
8 -2 27 20
20
26
-2
7
6 -2 25 20
5 20
24
-2
4 20
23
-2
3 20
22
-2
2 -2 21 20
20
20
-2
1
-100,000
2. Construction of new dwellings One study conducted by the ABS estimates that Australia has a cumulative housing shortage of approximately 250,000 properties.
the coming years. A property shortfall of this size will create a housing shortage, resulting in rapid increases in property prices, similar to what we’ve already seen.
For context, that study took place in 2016 before the COVID-19 pandemic and shows that Australia has had a shortfall of at least 200,000 houses since 2013.
However, this critical shortage also equates to fewer rental properties on the market. Fewer rental properties for tenants to choose from creates lower vacancy rates.
At the end of 2017, there were just over 200,000 new dwelling commencements. The following year and until the end of 2019, the number of commencements plunged. By 2025 it is expected that Australia will be building fewer homes than we were when we had a smaller population. For example, in 1989, we saw 176,920 approvals when the population stood at approximately 16.8 million. We are now seeing forecasts of circa 169,755 commencements of all dwelling types for a population of approximately 25 million. It’s this lack of construction commencements that will lead us to an even larger property shortfall in
The clear benefit that this situation offers investors is achieving rapid capital growth, while at the same time enjoying consistent rental yields. Moreover, houses in outer fringe suburbs of almost all capital cities will see significant growth in the years to come. Primarily due to affordability, properties in select suburbs hand-picked for their growth and investment potential, will see excellent gains in only a short period of time. This will offer investors the valuable opportunity to accumulate substantial wealth as well as reliable passive income.
Australian Dwelling Commencements / HIA Forecasts Forecast
230,000 210,000 190,000 170,000 150,000 130,000 110,000 90,000
19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 20 17 20 19 20 21 20 23 20 25
MAT of No. of commencements
250,000
Source: ABS 8752, HIA Economics State and National Outlooks – November 2021
5 key indicators of the next property boom 2022–2027
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3. Internal migration Throughout the COVID-19 pandemic we saw high levels of interstate and regional migration which has helped further fuel demand for property. The notion of working remotely has become more and more the norm for many businesses and their employees. This has driven a mass migration of those living in capital areas moving toward more affordable destinations as well as well-serviced regional hubs. Consequently, there are numerous areas and regions that have achieved substantial price growth, as highearning individuals look to plant their roots down away from the hustle and bustle of urban living. It should also be noted that technology has played an important role in contributing to this migratory shift. Many white-collar workers and businesses are finding greater efficiencies and cost reductions by operating remotely. We anticipate that a hybrid working environment will be a popular choice for many industries in the years ahead. If so, this will help sustain interstate migration for some time yet.
Regional Migration – Share of all Internal Migration Regions to greater capital areas
Greater capital areas to regions
Share of total migration (%)
7 6 5 4
Source: Regional Australia Institute Regional Movers Index, September 2021
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5 key indicators of the next property boom 2022–2027
M ar 21 Ju n 21
De c2 0
20 Se p
20 Ju n
De c1 9 M ar 20
19 Se p
19 Ju n
M ar 19
De c1 8
18 Se p
18 Ju n
M ar 18
3
Australia Net Interstate Migration as at March 2021
Net interstate migration
40,000
20,000
0
-20,000
NSW
VIC
QLD
SA
WA
TAS
NT
ACT
Source: ABS Net Interstate Migration for the year ending 31 March 2021
Affordability in the capital cities will also be a key topic this year as more and more people look toward other states, having been priced out of their own. Queensland was the destination of choice in the year to 31 March 2021 and saw the highest level of net interstate migration. In fact, from September 2020, 11% of all capital city residents migrating to regional areas have relocated to the Gold Coast.
“...from September 2020, 11% of all capital city residents migrating to regional areas have relocated to the Gold Coast.”
What’s interesting to note is that the top three Local Government Areas (LGA’s), that had been identified by the Regional Australia Institute as the most popular destinations among interstate migrants, were all pinpointed by Freedom Property Investors research prior to this surge. Warmer climates, stunning scenery and a general change of pace in living are just a few of the benefits facing interstate movers. However, there are signs now that this tide is turning, and those who had left the cities for greener regional pastures, may be slowly starting to migrate back towards metropolitan areas. While this is still yet to be formally seen, there is likely to be a return of some who had left but are now seeking a balance of remote work with the occasional office commute. Regional areas accommodate a wide range of lifestyle benefits, but the regions likely to remain most popular in the years ahead are ones which are less remote.
5 key indicators of the next property boom 2022–2027
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Areas such as outer urban fringe suburbs that still offer commutability to central business districts will continue to grow throughout 2022, though at a slower pace than last year. In 2020, our research identified an area in the Geelong region only a 1.5hr drive to Melbourne CBD. A major infrastructure project, the Geelong Fast Rail, looks to shorten this travel time further which will allow even more city workers to take residence in this region. The completion of this major future project will greatly boost the transport attributes of the Geelong region and subsequently enhance the value of property. These are precisely the kind of areas we look for at Freedom Property Investors, and our level of stringent research allows us and our members to invest safely for the future.
4. Demand for units Sitting at nearly half the price of a house, many buyers in the market, particularly first-home buyers, are gravitating more and more toward units. As both an affordable entry point, as well as offering a greater range of conveniently located options, units are experiencing a renewed buyer appetite. In Melbourne, the median price of a detached house surged past $1 million in the June quarter of 2021, rising about $445 per day according to the quarterly Domain House Price Report. Unfortunately this rate of growth is pricing many buyers out of the house market and consequently many are now turning their attention to units. However, this attention is creating additional demand and is driving upwards pressure on prices in areas where vacancy rates are lowest. Nationally speaking, the unit market balance is likely to tighten significantly in the short to medium term. Supply levels of units continue to fall in most markets across Australia and will remain moderate for at least a few years yet. As at September 2021, Melbourne recorded the largest portion of units currently under construction. In 2021, approximately 13,800 units were completed which had been slightly inflated due to delays in projects throughout 2020. Additionally, construction delays due to the more
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5 key indicators of the next property boom 2022–2027
National Inner City Apartment Supply Completed
Currently marketed
Under construction
Plans approved
Plans submitted
Number of Units
30,000
20,000
10,000
20 25
20 24
20 23
20 22
20 21
20 20
20 19
20 18
20 17
20 16
0
Source: JLL Research as at Sep-21
recent lockdowns will again see some projects delayed on completion to this year. On the demand side, units across the country are already attracting more buyers. With borders reopening, we expect that this will further boost demand from entering and returning students and migrants. The price difference of units compared to detached housing will likely push demand towards more affordable strata properties. This is great news for investors who are looking to grow or add to their property portfolios. Units tend to generate stable returns, so long as they are located in the right areas, are of quality build, and are aesthetically appealing to prospective tenants. They make a great addition to an investor’s portfolio and can often allow for a steady stream of passive income. In the years ahead, we could see more favour turning toward units, particularly in areas where future supply is limited and where populations are set to grow.
Units Under Construction by City Brisbane
Sydney
Adelaide
Melbourne
Perth
Canberra
17%
18% 1% 9%
22%
33% Source: JLL Research as at Sep-21
5 key indicators of the next property boom 2022–2027
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5. Rates and regulations Likely, you would have already heard the discussion about whether or not the Reserve Bank of Australia will increase interest rates earlier than originally expected. It is important to remember that interest rates, as they are currently, are still the lowest they have ever been in Australia. While it is only inevitable that the RBA will seek to adjust rates once certain economic milestones are reached, the impact this may have on investors is minimal. The last time the RBA raised its cash rate was in 2010 and it has previously stated that it does not expect to do so again before 2023. However, a number of observers disagree and believe that this time could come sooner. Regardless, any increase from an already historic low base, simply means that investors should act quickly in 2022 to assure a greater profit margin. Another factor to consider is regulations in the lending sector. In October 2021, the Australian Prudential Regulation Authority (APRA) increased the servicing
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rate for lenders, reducing the debt capacity of borrowers by around 5%. In real terms, this means the average family’s borrowing capacity might decrease by $35,000. However, non-bank lenders (who are not regulated by APRA) will still provide viable lending solutions at competitive rates. The APRA announcement is a timely reminder that it is indeed a good thing for investors to have an organisation whose job it is to ensure a healthy lending sector. A healthy lending sector is closely intertwined with a healthy real estate sector. Too many risky loans can have a contamination effect on what is otherwise a healthy market. Property investors need not be worried by the talk of regulatory changes or rate rises. Australian property is considered one of the safest investments for many reasons, and in times of inflation, property investors are often the first ones to benefit.
5 key indicators of the next property boom 2022–2027
“Every economic shock in Australia has led to an economic boom. The health crisis we have all faced these last two years is no different, and there will be big opportunities for smart investors like us to build rapid wealth in 2022.” says Lianna Pan.
If there’s one thing we can say positively about the health crisis of the last two years is that it has highlighted the overall resilience of the Australian property market. With a combination of historically low interest rates, low housing stock levels, and an economy in a V-shaped recovery, the real estate market looks set to continue on a strong growth trajectory. “Every economic shock in Australia has led to an economic boom. The health crisis we have all faced these last two years is no different, and there will be big opportunities for smart investors like us to build rapid wealth in 2022.” says Lianna Pan. It is likely that we’ll be feeling the effects of this economic shock still for years to come. Therefore, investors would be wise to position themselves for future gain as soon as possible. Achieving substantial equity gains in only a short period of time is the reality facing many investors who may be considering investing in 2022. But this opportunity won’t stay around for long. Between 2022 and 2027 we will see a massive shift of wealth toward investors who bought the right properties in the right areas.
Speak to our friendly team of experts today
This is what we do at Freedom Property Investors. We spend thousands of dollars each year on the latest property market insights and economic data that allow us to identify growth opportunities before the rest of the market. In times of change and uncertainty, the informed investor will always beat the uninformed. By arming yourself with the right information, and with a team like ours to back you, the future has never looked brighter. Get in touch with us today and find out how we can help you achieve financial freedom for yourself and your loved ones. We’ve been doing this for the last 10 years and we are proud to be helping thousands of ordinary Australians increase their wealth through smart and safe property investing. We can do the same for you and it all starts with a simple, no-obligation phone call. Discover your investment potential today and speak with our team of property investment experts.
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5 key indicators of the next property boom 2022–2027
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