You probably know that this current property boom is fuelled partly by a housing shortage. But did you know that we’re also facing another type of shortage that will slow new builds to a crawl… potentially inflating the market even further?
A friend of mine who has been in the building industry for a long time recently shared a letter from Australia’s Master Builders Association with me.
It said that due to uncertainness and high lead time, they have no access to timber importers. What’s worse, local suppliers are not equipped to pick up the shortfall.
With increased demand for timber for new builds, and fewer resources to go around, the largest timber supplier in Australia is currently saying that anyone who puts an order in now for a timber frame will be delayed. If you put an order now, they are scheduling the deliveries for 2022.
The sudden surge caused by the first home buyer’s grant, inter-state migration, low mortgage rates, and early access to the Superannuation access scheme has skyrocketed housing and construction demands.
They’re saying they are working hard to find a solution… but what can you do when there is limited supply of timber in Australia, and imports are painstakingly slow due to COVID?
It’s a pretty alarming state of affairs both for people planning on a new build, and for the builders themselves.
What Does This ‘Perfect Storm’ Mean?
All this leads to one thing—cost. Simply put: it will cost more money to build a house.
Right now, plasterboard has gone up 4% since the beginning of March. Concrete has gone up 6% since February. Steel has gone up 35%, and timber, well it hurts to even think about it!
Since COVID, the cost of construction has gone up overall by about 30%.
But the truth is, if you buy a property with materials before it goes up yet, you can almost make a 20% to 30% windfall profit on the building component. And the truth is, with such demands, it’s putting pressure on house prices to go up.
Hardworking Guy Delayed To Take Action Then This Happened…
I have been coaching aspiring property investors for many years. And I have been an investor for even more. During that time I have been in many booms and corrections. I remember I had a guy that I was coaching some ten years ago.
Basically, he could have afforded to buy two properties. And he missed the window. Then three years later, he couldn’t buy anything. Because he didn’t have the finances that could afford the new prices.
Then about a year ago, he got another opportunity when interest rates went down. He missed the opportunity again, and now he can’t get in again.
For ten years, he has done nothing. He’s a great guy who earned good money, but he couldn’t get the combination right and on time.
This is why I always say to people to never rush into buying a property. Because you need first to do your due diligence. Get the right mentor, get the right team around you to do it.
But don’t be slow either. You need to have a balance.
The Amount Of Research We Do Before Taking Any Action
Something interesting is that a lot of people don’t know the amount of research that we do here at Positive Property Solution. One of the most important things is to pinpoint hotspots. That is, suburbs that are reaching the right time on the property clock and are at the cusp of a big rise.
To find them, you need to take into account both leading and lagging indicators.
Lagging indicators are what property magazine experts do most of the time. They see an area that went up four years in a row. They assume because it has gone up an average of 20% each year, that you should buy.
A lot of developers and building companies say that too. But that’s a lagging indicator. And what I mean by that is, it happened in the past. There is no guarantee it will happen again in the future.
But more likely, if it’s going up five years in a row, then it’s probably not going up anymore. It’s hit its peak, and it’s all downhill from there. All the while novice investors are paying top dollar to get in, thinking that their new property will be a gravy train for the next 5 years or so… only to find they start losing value quickly.
And then there are leading indicators. Leading indicators are something like an average discount. When average vendor discounts start going down month by month, profits will suddenly start going up. Because when you’ve got a lot of people in the area, it’s going to be bad for the area.
Because the supply and demand balance has shifted. You always want to have more people wanting to get in on an area than there is space available for them.
Know What’s Happening Behind The Scenes
If you see anyone succeeding in the property industry, they are probably doing things you don’t even realise that you don’t know. That’s because there’s a lot more going on behind the scenes than the average investor, who gets all of their information from magazines, is going to be aware of.
In property you’ve got to know what you are doing. And that’s why we have a 14 day challenge to help people who want to create their own Blueprint for investing in property.
Over 14 days, participants hear from the experts and learn from me how to develop your plan, fix your credit, look good for the banks, organise your tax structure, choose the right property, set yourself up for 5-10 properties (instead of getting stuck at 1), and much more.
The Challenge helps you get educated and create an informed plan for getting your first, second, third and beyond cash flow positive investment properties.
It’s a great way to get your ducks in a row and start on your path to becoming a property investor in a safe and steady way.
At the moment I’m offering entry to the challenge with no payment upfront, so there’s basically no risk involved.
If you’re interested in finding out more, go visit this link to check it out.