Hotspotting Terry Ryder & Tim Graham

Home builders and property developers make their money creating new dwellings for Australian households.
If they get it right, they can make lots of money doing what they do.
When they decide NOT to do what they do, you have to ask why.
Why are the builders of major projects of housing or apartments walking away from their plans?
Why are big companies who have spent years and millions of dollars planning a major project making the decision not to build it?
We’ve seen many instances recently. An example is the decision by AVJennings to abandon a major housing development near Caboolture in the outer northern suburbs of Greater Brisbane. This project would have added 3,500 new homes to a market where there is a desperate shortage.
Brisbane is a market with high demand and a serious shortage of homes. Why would a big developer with a proven track record and the capacity to deliver these kinds of projects make the very big decision to walk away from the project?
All that time and money wasted.
The answer is: it’s simply not viable.
AVJennings said massive cost escalations – including the infrastructure charges and delays in getting approvals imposed by local councils – meant the project was no longer viable.
I have had discussions recently with developers who say that the cost of creating big residential projects is so high, it’s not economically and financially feasible.
They would have to place such a high price on the end product that few households would be able to afford to buy the homes.
A number of developers have spoken out about the impact that the cost impositions of local councils have on making projects difficult or unviable.
Orchard Property Group managing director Brent Hailey says the major infrastructure costs imposed on them make it too expensive for them to build homes.
Hailey said that, for example, developers in that Caboolture West precinct that AV Jennings has rejected had to pay for council infrastructure charges and also state government charges because it’s in a Priority Development Area.
Hailey says: “We’re at this point now in SEQ where unless the solutions are put in place quickly, there’s going to be a rapid decline in affordability, forced by supply not meeting demand.”
He says: “The problem facing developers is the cost of delivering the infrastructure and the balance between fully servicing those costs and trying to get an affordable home. There’s the normal council charges and the Priority Development Area (PDA) charges. During Covid-19 costs went through the roof, so now infrastructure is costing a lot more.”
Here’s another issue which is preventing the creation of affordable homes in Australia.
Prime Minister Anthony Albanese’s pledge to build 40,000 affordable homes through the Government’s $10bn housing fund will struggle to deliver any houses at all in Labor’s first term of office because only a handful of builders in Australia are eligible to participate in the program.
Rules written into the Housing Australia Future Fund legislation require builders contracted to work on new social and affordable homes under the scheme to be accredited for working on government-funded projects.
However, of the more than 400,000 construction companies registered in Australia, only around 500 are accredited by the Federal Safety Commissioner under the Work Health and Safety Scheme for eligibility to bid for head contracts funded directly or indirectly by the government.
There are few if any residential builders accredited under the scheme in Tasmania and only a limited number in regional Australia.
The industry claims the limitation threatens to severely hamper or stall Housing Australia’s ability to deliver its target of 40,000 social and affordable homes.
This comes at a time when the new construction code being imposed by governments is adding $30,000 to $40,000 to the already-high cost of building new homes in Australia.
These are just the

Home loans to property investors jumped for a third-straight month in April, rising at a faster pace than loans to owner-occupiers.
The value of new loans to investors rose 5.6% to $10.9 billion in April, to be up 36% compared with a year ago, according to the Australian Bureau of Statistics.
Part of that increase, according to the ABS, is an increase in the size of the average loan.
The average size of an investor loan for the purchase of an existing home grew almost 10% since April 2023, from $592,000 to $648,000.
The strongest markets were New South Wales (where investor lending increased 44%) and Queensland (where investor lending climbed about 46%).
The higher rate of investor activity comes at a time when rents continue to rise, underpinned by very low vacancy rates, to compensate (partly, at least) for higher interest rates, as well as higher council rates, higher insurance costs and higher maintenance costs.
Figures from property consultancy CoreLogic earlier this month showed rents recorded an annual rise of 9% in Sydney and 10% in Melbourne – which means rents in the two big cities are rising faster than prices at the moment.
The rate of price growth is higher in smaller capital cities like Brisbane, Adelaide and Perth, but rental increases are as high, or close to being as high, as the rise in sales prices in those cities.
CoreLogic research director Tim Lawless says: “For most investors, higher yields will be welcome considering variable interest rates for investor loans are averaging 6.7%.
“Given the high cost of debt, a large portion of leveraged investors are probably recording a cash flow loss despite the substantial rise in rental income.”
The increased activity from investors is welcome, after a period of being well below historical averages – which, in simple terms, is why we have a rental shortage, given that investors provide over 90% of the homes rented by tenants in this country.
The rise in buying activity by investors confirms the anecdotal evidence we have seen at Hotspotting.
Right from the start of 2024, we have observed that many investors started this year with intent – and are taking action.
This is desperately needed across Australia, as it’s the only way that the chronic shortage of rental homes will be improved.
 

Where’s the strongest suburb for future price growth in Australia?
What’s the most consistent location for sales activity in the nation and therefore likely to deliver superior price growth?
And what’s the absolute worst place to buy real estate right now?
The answers to all those questions and a whole lot more are revealed in the new Winter edition of The Price Predictor Index.
Now, we publish a lot of great reports with unique insights into property markets across Australia - but this is undoubtedly our best report.
The thing that’s so special about this report is that we do something that no one else does in Australian real estate - we chart trends with sales activity and use that to predict likely future movements in prices.
We apply a rating to every suburb and town in the nation - whether the market is rising, or recovering, or fading, or declining.
Our analysis of this data allows us to pinpoint the locations with the strongest trends in real estate across Australia - the ones most likely to deliver superior price growth.
We also identify the places to avoid, the ones where market trends are negative.
We pinpoint the best clusters of growth suburbs in the nation - the local government areas where suburbs collectively have the most positive trends with buyer demand.
We also identify the winners and losers among the big market jurisdictions - the eight capital cities and six state regional markets.
It’s fair to say that many of the findings will surprise a lot of people.
There is so much priceless market intel in this one report - so, if you buy just one research report this year, this is the one to get - the new Winter edition of The Price Predictor Index.

I’m about to tell you what’s going to happen with property prices this year and I’m going to tell you why.
The information real estate buyers MOST want to know is where to buy for superior capital growth, both in the short term and the long term.
The problem for investors is that the research companies and the media don’t tell us that.
They tell us what’s recently happened with property prices. They inform us about the past.
And while that may be interesting, it doesn’t provide us with the really key information: what will happen with prices in the future.
That’s where Hotspotting comes in. Our proven methodology has a track record of predicting the future successfully and often.
And one of our core techniques is used to create the best of our stable of reports: The Price Predictor Index.
The underlying principle is really simple but wonderfully effective.
We don’t spend our time charting price movements - we devote our resources to following what’s happening with sales volumes - the number of sales in each location and whether they’re rising, flatlining or falling.
History tells us that sales activity is a forward indicator of what will happen with prices.
And the new Winter edition of the report provides important clues about which markets are rising and which ones are falling.
Here are some of the key pieces of market intelligence that our new analysis provides:-
The Perth boom has likely peaked and we urge caution for the many investors diving into this market after three years of big price growth.
Melbourne prices will perform a lot better in 2024 than they did in the past two years.
Some of the regional markets have stepped up as likely national leaders on price growth in the next 12 months. They include places like the Wollongong region, including in particular the Shoalhaven LGA; Gladstone in Central Queensland; and Albury-Wodonga at the Victoria-NSW border.
Smaller capital cities which have been weak lately are showing solid signs of recovery and will do better in the next year, including Canberra and Darwin.
Some of the iconic markets which had spectacular booms up to 2022 and have been in a correction phase since then, are now showing signs of moving into their next up-cycle. They include Byron Bay, the Sunshine Coast and the Mornington Peninsula.
Other former boom markets that look to be heading into another period of growth include Albury-Wodonga, Ballarat and Bendigo in Victoria, Hervey Bay in Queensland and Launceston in Tasmania.
Apartment markets in good locations in our biggest cities continue to attract buyers in large numbers with improved capital growth performance - Sydney City and the Inner West nearby are among the stand-outs.
The Winter edition of The Price Predictor Index has other priceless intel - including the National Top 50 Supercharged Suburbs list, the 50 most consistent growth markets in the nation, the 10 leading local government areas in Australia and the 50 worst declining markets, the ones to avoid. 
From these lists, we nominate the No.1 best supercharged suburb, the nation’s most consistent location which is delivering big price growth - and the worst place to buy right now.
And, if you want to know what they are, you’ll need to get a copy of the report.
 

Are you ready to elevate your property investment game? Join us for an exclusive webinar titled:

"From Beginner to Pro: Mastering the Art of Commercial Property Investment."

This insightful session is designed to equip you with the knowledge and strategies needed to thrive in the commercial property market.

About the Webinar

Hosted by Tim Graham, General Manager of Hotspotting.com.au, and featuring guest speaker Steve Palise, owner of Palise Property, this webinar will delve into the intricacies of commercial property investment.

The author of 2 books and creator of The Commercial Property Institute, Steve, who retired before the age of 30 thanks to his impressive property portfolio, now dedicates his expertise to helping others achieve financial freedom. His analytical approach, rooted in his background as a chartered mechanical and structural design engineer, provides a unique and practical perspective on property investment.

Key Topics Covered


What is Commercial Property? Understanding the basics and significance of commercial property. Difference Between Residential and Commercial Property Key distinctions and their implications for investors. Myths of Commercial Property Debunking common misconceptions and myths. Benefits of Commercial Property Exploring the advantages and financial potential of commercial investments. Risks of Commercial Property Identifying potential risks and how to mitigate them. When is Commercial Property Right for You? Assessing if and when commercial property aligns with your investment goals. To take advantage of Steve's amazing offer of enrolling in The Commercial Property Institute's online course for FREE for a short-time only (usually $4,997), visit www.commercialpropertyinstitute.com.au and use the code word HOTSPOTTING

It’s important for property investors to understand the difference between a population and home building hotspot – and what we at Hotspotting would define as a property growth hotspot.
There are those who believe that the best philosophy in selecting good places to buy real estate is to follow the population growth – and buy in the locations where population is growing the most or the fastest.
This, we believe, is a very poor strategy.
Very often, the locations that have the highest population growth rates do so simply because they’re locations on the fringe of a major city where there’s land available for building new housing estates – and naturally the population will grow there, often from a very low base.
And sometimes the growth in prices in these kinds of locations is subdued because there are large quantities of new housing supply being created – i.e. there’s an absence of shortage.
By contrast, some of the best capital growth is often achieved in locations where there is little or no population growth – because they’re established suburbs with no large vacant areas for new homes to be built.
The only way the population can grow in such places is by increased density – for example, houses are knocked down and replaced by apartment buildings.
Recently the Housing Industry Association published its latest hotspots report – and their definition of a hotspot is very different to ours.
The HIA report seeks to identify the areas where the greatest amount of new population and new home construction is occurring.
Media reported on this with headlines such as: “Population Boom Creates Hotspots”.
A typical article said:
“Surging population growth is creating housing hotspots in the suburban outskirts of Australia’s major capital cities.
“The annual Housing Industry Association Population and Residential Building Hotspots Report says the northwest Sydney suburbs of Box Hill and Nelson are Australia’s biggest hotspots for construction, followed by Fraser Rise and Plumpton in Melbourne’s west.”
Now, this is a perfectly valid report for the HIA to produce, because it speaks to the primary activity of its members, the important business of creating new dwellings – something the nation needs, because there’s a serious shortage.
The HIA definition of a hotspot is “areas where population growth eclipses the national rate of 2.4% and building work is worth more than $200 million”.
But it’s important to understand that such places are not necessarily good places to invest.
The Hotspotting definition of a hotspot is a place where there are underlying economic factors likely to create superior capital growth in the medium to long term.
Our EMPERICAL formula for selecting the locations likely to become capital growth hotspots includes the strength and depth of the economy, the size of the population (but not how much it is growing), the existing infrastructure and amenities, investment in new infrastructure and a number of other features.
Locations that satisfy the various criteria in our EMPERICAL formula are far more likely to deliver superior capital growth than city fringe locations where the population is growing fast through new housing estates.