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Real Estate Market Wrap 🗞️ The Rising Costs of Construction and What It Means for You

• Tom Panos - Real Estate Coach & Trainer

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• Key factors driving prices: Economy, population growth, gov policies & construction costs.
• Political focus on housing = big impact on future market trends.
• Supply challenges & rising costs are boosting demand, especially for units.
• Speculative demand climbing with infrastructure growth & foreign investment.

My Clearance Rate: 12/13

Tom Panos:

I think a lot of people actually turn around and say to themselves this is all a result of interest rates going down. Now I've got to tell you, a quarter percent drop which gives people a saving of I don't know what it is 70, 80 a month is neither here nor there. But what has changed is the sentiment. Well, hello, hello, hello, late finish. It is quarter to seven in sydney and I have just finished my 13th auction of the day and I want to let you know it was a day to remember. It reminded me of the days where there was fear of missing out in the marketplace. Now, I don't know whether it's going to be there next week, but what I can tell you, it was there this week. There was fear of missing out. This week there was fear of missing out. There was a property I've just come from in Moorbank that sold for an amazing number, like I've got to tell you, nearly 200 grand more than what the expected price was. This is on a 1.6 type property 1.6, not a 3 million type property, hi Michael. So let me give you the results, ladies and gentlemen 13 options today, 12 out of 13. That means that since the rate cut, we've had four weekends of options and they're all over 90%. One week was 100%, the rest have all been over 90%. What were the prices like? Good to above average? Not amazing, there is no boom. However, I have not seen the marketplace have that much health for a number of years, a number of years, a number of years, and I sat down and I wrote out a few notes as to the things that impact real estate prices, because I think a lot of people actually turn around and say to themselves this is all a result of interest rates going down. Now I've got to tell you a quarter percent drop, which gives people a saving of I don't know what it is 70, 80 a month is neither here nor there, but what has changed is the sentiment, and sentiment is one of a number of factors that affect a real estate market. So let me run through, particularly for those of you that are trying to work out what's going to happen in this market, if you're a buyer or even if you're a seller. Well, number one, let me tell you the economic conditions at the moment are about the fact that buyers are feeling that rates are going to come down more, down, more, and that has pushed a lot of buyers to take the plunge and put their hand up and bid with the view that they'll be paying more later if they don't.

Tom Panos:

Interest rates is the second factor and a main factor. So factor number one is economic conditions. Second factor is interest rates. Third factor is population growth. That is a major indicator on what's going to happen in real estate.

Tom Panos:

So we clearly know that Australia has a population growth. Not only does it have a population growth, it has a population growth problem and that is that we are bringing in people left, right and centre, most of those coming to Sydney, melbourne, brisbane and Perth, going into metro areas and we are not building properties for those people. And the reason we're not building properties is, as I said during the week on one of my Insta reels, a developer ain't going to be paying $1,000 a day to tradespeople, having risks with governments slowing things up and having the higher interest rates because nearly all developers are using banks' monies. So they're just not building. They're not building. I mean, it's got to the stage now where, when you look at a block of units, you can buy a block of units as a buyer at most likely cheaper than it would cost to actually build that property right. So these are the factors that are impacting prices population growth, economic conditions, interest rates.

Tom Panos:

And then the next thing is government policies and taxation. And what are we seeing? We're seeing both political parties, both the liberals and the Labor Party, are spruiking on their social media campaigns. One subject property. They're not talking about climate change and they're not talking about gender politics. They're talking about property. And the reason they're talking about property is their marketing research. People have obviously tapped them on the shoulder and said this is what's keeping people up at night. Renters are being kept up at night thinking how they're going to keep paying the rent. Buyers keep thinking how can I actually buy a property? So I've got to say to you, ladies and gentlemen, we've got another reason why I think property prices are going to keep going up, and that's because we've got both parties that are now using real estate as their strategy to win the election.

Tom Panos:

Then you've got the next factor that impacts real estate supply and construction costs supply constraints and construction costs. So the constraints are that if it's difficult for people to actually provide a supply, and then you've got difficult for people, even if they can actually build, the costs are out of hand. So we know that they're really like. You know, it used to cost around 350 grand to build a unit per unit, right, when a developer built units. They use 350 as the ratio, right, per unit, mate. It's now 550. Who's going to go off and build? So that's why I'm telling you, by the way, I reckon units are the commodity to be buying, because they just haven't built any in the last few years. The next thing is consumer confidence and speculative demand, and that's what we're seeing at the moment. We're seeing consumer confidence and speculative demand going up in the last month and that's why we're seeing a change in this market.

Tom Panos:

Foreign investment is another key indicator that impacts real estate prices. Infrastructure development wherever you see there's an infrastructure being built, you go off and you buy real estate around there, because it's basically going to say they're putting shops up, they're putting transport up, they're putting hospitals up, they're putting education up there, they're building roads there. It's going to mean that people are going to be living there. And the last one is availability of financing, right. So I remember working in the marketplace in 1991, which came after the 1988-89 boom, and there was just no finance available. No one could get any finance. So, ladies and gentlemen, I've given you these factors. If you analyze those half a dozen or more factors, they're all looking positive.

Tom Panos:

I think I'm going to put my neck out on the line and say that I can only see it going up and in no other direction, unless there's something crazy that's going on. Obviously we've got world politics. At the moment, everyone's turning off Elon Musk. I've got a mate of mine, scott Dutton. He actually spoke at ARIC, just told me an hour ago he's getting rid of his tesla, doesn't want to be aligned with elon. Actually, this, this, this zooms, this, uh, live streams coming out of my tesla. I've had a tesla since 2017 the tesla rex and I love the car and, um, I think some of what elon does is good, not all. I could say the Not all. I could say the same about Trump. I could say the same about the opposition party. I could say the same about Dunn. I can say the same about Albo.

Tom Panos:

A lot of people automatically will come up to the assumption and they'll think to themselves Panos is a liberal voter. I'm a swinging voter. I've made that very clear. I came up from a very poor family and I came up in an area that was brought up that Labor were the people to vote for. But as I got older I started making up my own minds and not just having parental influence. And I swing vote, I go from one to the other, I swing vote, I go from one to the other and I can tell you I think if you didn't have both parties you'd have an absolute mess. That's what they're there for. Each party's there to keep the other one honest.

Tom Panos:

Many people have asked me today on DMs about that vendor that I posted on Instagram Yesterday. A vendor brought their friend to the pre-auction vendor meeting on the phone yesterday and you know what it's like. You know when you've got a friend, normally the friend does not help the vendor. I think that they actually make things worse. And today I had another friend of a vendor on another property and that vendor turned around and told their friend. The vendor's friend told the vendor they should not accept the offer.

Tom Panos:

Now I can tell you anyone that has dealt with me knows I don't actually push vendors to accept offers. If they don't feel comfortable, I say don't sell it. This was good money on this property and I said to the owner if it was my property I would sell it, but it's not. So you've got to make the decision. Decision. The vendor's friend. The vendor's friend told them that they shouldn't sell it and that they said that they'll get more money next week. And you know what I said to the vendor's friend Well, how sure are you of this? He says I'm definite it's cheap at this price. And I said well, in that case, why don't you buy it at this price? Let's not actually do the deal, but you commit to buying it and if we get more money in the next two weeks, you don't have to buy it. How's that, guess what that property got sold today? Have a good night.