Rask - Pete Wargent’s top 3 Australian property tips for 2025
The podcast provides insights into the Australian property market, highlighting the unexpected resilience of the market in 2024 despite rising interest rates. Key factors include high immigration, low rental vacancies, and rising rents. The cost of constructing new dwellings has significantly increased, with a 73% rise in apartment construction costs since 2020, leading to a supply shortage. For 2025, the speaker suggests three main investment tips: becoming a 'property pro' by adopting a professional approach to property investment, consulting with financial experts to optimize borrowing strategies, and thinking in decade-long time frames to navigate market cycles effectively. The importance of understanding one's personality type in investment decisions is emphasized, as well as the need for strategic planning and maintaining financial buffers to withstand economic fluctuations.
Key Points:
- Adopt a professional approach to property investment by creating a strategic plan and maintaining detailed financial records.
- Consult with brokers or financial experts to ensure optimal borrowing strategies and manage interest rate risks.
- Think long-term by planning in decade-long cycles to better navigate market fluctuations and economic changes.
- Understand your personality type to tailor investment strategies that align with your strengths and weaknesses.
- Prepare for continued high population growth and housing shortages in Australia, which could impact property values.
Details:
1. 📢 Introduction & Disclaimer
- The content is limited to general financial information.
- Advises consulting a financial planner for personalized advice.
- Refers to a financial services guide for more details.
2. 🏠 Podcast Episode Introduction
- The introduction emphasizes the necessity of following the guidelines outlined by rk.com FSG before taking any actions, ensuring compliance and strategic alignment.
- It briefly sets the stage for the episode, hinting at key topics to be discussed, which may include compliance strategies, risk management, and actionable insights for businesses.
- Listeners are prompted to consider these guidelines as foundational to the discussions that will unfold, aligning with the episode's overall focus on strategic implementation and compliance.
3. 📈 2024 Property Market Overview
- The episode is hosted by Pete Waren from Alan Wen Property Buyers, with co-host Chris on holiday.
- The focus is on the 2024 property market overview.
- Listeners can expect insights into current trends, predictions, and expert advice on navigating the property market in 2024.
- The episode will cover key areas such as market demand, investment opportunities, and potential risks.
- The structure includes an analysis of economic indicators, interviews with industry experts, and a Q&A session with audience questions.
4. 🔍 Factors Impacting the Market in 2024
- High immigration contributed to a stronger than expected housing market despite rising interest rates.
- Low rental vacancy rates and rising rents were observed, particularly in capital cities and regional markets.
- A chronic supply shortage of new homes significantly influenced market dynamics.
- Perth's property market saw exceptional performance with property prices increasing by approximately 30% in 2024.
- Brisbane and Adelaide also experienced strong property market performance.
- Towards the end of 2024, larger cities with higher mortgage burdens, such as Melbourne, showed signs of market slowdowns.
- The property market's resilience was partly due to high population growth and supply shortages despite economic challenges.
- Interest rates, which rose to around 6.5%, eventually impacted the market but with a delayed effect due to the supply-demand imbalance.
5. 🏗️ Rising Construction Costs
5.1. Rising Construction Costs Overview
5.2. Factors Contributing to Rising Costs
6. 💡 Top 3 Tips for Property Investment in 2025
- Since March 2020, the average cost to build a new house has increased by 43.6%.
- The cost to construct townhouses has risen by 43.7%.
- Apartment construction has seen a further 19.4% increase in 2024 alone, with a cumulative increase of 73% since March 2020.
- The average cost to supply a new apartment unit to the market is now $64,000.
- Due to these increased costs, many developers are avoiding the current property market cycle, particularly in expensive cities like Sydney and Melbourne where profit margins are slim.
- Approximately 3,000 developers and construction businesses have faced insolvency or administration in the past 12 months.
- Potential rebounds in construction activity may occur in cities like Perth, Brisbane, Adelaide, and possibly Melbourne, spurred by rising prices and stamp duty exemptions.
- Sydney faces a significant shortage in new apartment supplies over the next two to three years.
7. 📚 Embracing Professionalism in Investments
- Adopt a professional business approach to property investment, treating it with the same seriousness as a full-time profession.
- Steven Pressfield's 'Turning Pro' is recommended for its insights into developing a professional mindset, applicable to property investors beyond just creatives.
- Identify and leverage personal strengths while acknowledging weaknesses. For instance, if budgeting meticulously is a challenge, seek tools or partners that compensate for this area.
- Incorporate detailed planning and analysis into investment strategies to mitigate risks and capitalize on opportunities effectively.
- Utilize professional development resources to continuously improve investment skills and adapt to market changes.
- Consider collaboration or mentorship to enhance expertise and gain different perspectives on property investment.
8. 💼 Importance of Financial Strategy & Lending
- Successful property investors combine Massive Action with a strong understanding of financial strategy, including cash flows and investment returns, to maximize their outcomes.
- Avoiding 'analysis paralysis' is crucial; investors should balance strategic planning with decisive action to capitalize on opportunities.
- Developing professional habits and engaging in strategic planning are key steps in turning professional in property investment.
- Engaging with brokers or lending professionals is essential to optimize financial strategies, especially under current complex lending regulations.
- Interest rates have fluctuated, requiring borrowers to be prepared for repayments under hypothetical higher rates due to stress tests.
- Refinancing and consulting financial advisors can secure better mortgage rates, ensuring financial stability and optimal lending strategies.
9. 🕰️ Long-Term Investment Perspective
- Focus on investment strategies suitable for a decade-long time horizon. Short-term market fluctuations are less relevant to long-term property investment success.
- Typical property market cycles span 7-10 years, thus planning for multiple cycles is crucial for long-term success.
- Key investing years for most individuals are between ages 25 and 65, potentially covering 3-4 decades and several property market cycles.
- Long-term investment should consider economic cycles, including periods of high and low inflation, interest rate changes, and supply-demand dynamics.
- In specific locations, aim for household income increases of 40-50% over a decade as a metric for investment viability.
- Avoid getting bogged down by daily media commentary, which often focuses on immediate news rather than long-term investment fundamentals.
- Consider long-term fundamentals like location desirability and economic growth rather than short-term market trends.
- Plan for life changes over decades, such as changes in personal circumstances, which can affect investment strategy and outcomes.
10. 🌟 Outlook for 2025 & Closing Remarks
- 2024 saw record household wealth for Australia, amounting to about $17 trillion.
- Australia's population growth is projected to continue at a high rate, adding approximately 500,000 to 550,000 people annually, contributing to a chronic housing shortage in 2025 and beyond.
- Money markets are pricing in falling interest rates over the next 18 months, which historically benefit the property market.
- A professional approach to property investment, focusing on risk management and sensible planning, is advised to succeed in the market.
- Bank lending competition is expected to increase, potentially lowering lending assessment buffers to around 2.5 percentage points.
- Developers are not building enough apartments to meet housing supply demands, indicating potential growth opportunities for property investment.
- It is suggested to have a decade-long property plan to capture upside potentials in the market.