Understanding the Perth property market with Trent Fleskins

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Hello and welcome back to another episode of the podcast. Today I have a special guest here with me. Please welcome Trent Fleskens to the show and today We’ll be chatting all about what is happening in the Perth market. Trent is one of the leading minds in WA when it comes to the property market. He’s a managing director of strategic property group and the host of the Perth property show podcast as a licensed real estate agent and settlement agent and mortgage broker.

He’s a deep understanding of the market dynamics and wealth of experience in the industry. We’re lucky to have him here with us today to share his knowledge and experience. Thank you for coming here, Trent. And thanks for having me in your studio recording here today.

Trent Fleskens: No worries, Jamie. It’s fantastic to see a young, ambitious and upcoming professional in this industry looking to make a difference with their own podcast. And I’m happy to contribute. 

Jaimi: Thank you so much. To kick it off, could you give us an update on the Perth market and what’s happening at the moment? 

Trent Fleskens: Okay, so we should go down to the foundation, the fundamentals of property and real estate, and that is demand and supply. Everything that we perceive with regards to price, pressure in the market, how many people and whatnot, all comes down to really a couple of basic things.

Fundamental data points and that is how much demand in there is there in the market at the moment and how much supplies in the market. So, on the demand side, we can easily track that. That’s a weekly number we get from REWA and we can see that that’s transactions that happen in the industry. You don’t get a transaction without a buyer.

There’s always a few thousand sellers sitting there ready to, sell, but a transaction doesn’t happen without a buyer. So every week we currently have between 900 and a thousand transactions happening. So 900 to a thousand people buying every week. And to give you some context back in the mining boom, that was maxing out at about 800 and in the lull about four years ago, that was at about five 50.

So we nearly have double the amount of demand that we had four years ago. And then if we look at supply supply, being the amount of properties that are available for sale. Uh, any one point in time back four years ago, it was as worth as bad as it got. And there was about 17, 000 properties on the market.

That’s when Bill Shorten lost the unlosable election to Scott Morrison in 2019, that has dwindled through COVID past our natural balance for about 13, 000 properties to now sit. Just over 6, 000 properties in the market. It’s the lowest we’ve ever had per capital in West Australian history. You couple that with the alternative market in property, which is the rental space.

It’s also the tightest rental market we’ve ever had in history. So, it doesn’t take a rocket scientist to understand where prices should be going when you’re in a position where demand is historically high and supply is historically low and we don’t see much of an opportunity for that to change in the near term.

Jaimi: How do we get out of this with a strategically low supply and demand? What is the way out of this and do you see it changing?

Trent Fleskens: No, uh, in the short term, things in property don’t happen quickly. That’s why I like property, you can assess it, you can take your time to make rational, pragmatic decisions. So, um, nothing really happens quickly.

Uh, and the question you asked is what will happen to move that or can, can that change anytime soon? Well, no, demand will only drop when there’s less people to demand property and, or they’re making less money to demand that property. Now, we know there are 900 people a week coming into the state right now, so they need 450 homes a week.

And we just said that there’s… There’s only about 6, 000 properties available right now. So um, that demand side is not going to drop anytime soon because not only are there existing West Australians who need to live and transact, there are also record high numbers of East Coast buyers, investors, most of them, and as we just said, emigrants coming across in their droves.

So demand is not going to drop and supply, supply can only increase when we supply more product to the market. That only happens when we build. More than usual, or when there’s X amount of mortgage stress. Now, that doesn’t really increase much supply because those people then will have to rent somewhere and they can’t rent somewhere.

So, uh, will we build more than average? Uh, well at the moment we’re building about 10, 000 properties a year. That’s the same amount that we were building 40 years ago when we had less than half the population. And the issue there is it’s not like there’s a whole bunch of traders sitting around saying I haven’t got any work.

They’re actually saying we’ve got too much work, we want to take a holiday. We, uh, don’t have any capacity to do more work. So we need to build about 25 to 30, 000 properties a year. We’re building 10 and the traders are saying we can’t do any more. That is, I guess, this, these most straightforward way I can explain how the current demand and supply relationship is not going to change going forward in the.

Medium term. And by medium term, I can say at least two to three years. 

Jaimi: Yeah. So two to three years, nothing is going to change because of that. And what do you think is going, like, what do you forecast is going to happen? We’ve obviously got a lot going on with the interest rates in the market as well. How does that come into effect with everything?

Trent Fleskens: So the demand and supply relationship is the fundamental relationship that impacts price. And there’s one other, and that is. Serviceability, or the assessment rates with the banks. Now, that is obviously governed by the cash rate from the RBA. The RBA is on their own, uh, on their own lane at the moment.

They’re hell bent on reducing inflation, whether people agree with that or not. And that has an impact on house prices. They actually don’t care about house prices. Their job is not to have any regard for house prices. They’re not interested in whether a market is booming or busting. They’re only focused on inflation, and it’s just that because we all have mortgages, we are the ones that are impacted the most when it comes to our disposable income.

Now, where will interest rates go? How will that impact pricing? Blind Freddy could tell you that nearly everyone’s gotten the interest rate forecast wrong. Even the RBA governor got it wrong in over the last couple of years, so… You’d be very brave to have a punt at picking where it’s going to go next.

The markets, if you have a look at the markets, where the bonds markets are all going, they’re all saying that they think it’s done, there’s no more rises to come, and that we will see drops by the start of next year. The bonds market isn’t always right. So, from that point, very possible still that we could still see another couple of rate rises.

That pain will stay there until people stop spending money on consumer goods. So, if you want interest rates to stop rising, stop buying things. That’s probably the easiest way to go about it. Stop using your spare cash to buy consumer goods because it only pushes prices up further. So, how will that impact prices?

I would posit, I guess, a metaphor or something of that nature that demand and supply is like a seesaw and the interest rates are like the clouds. Now the kids can play on the seesaw until you can’t see from the clouds, the fog dropping so, so far right now. We’re not at that stage. I guess the convenient point of that is that the Sydney market is, you know, six, seven times bigger than ours.

They are where all the media comes from, the noise, and their affordability is about 50, 60 percent less than ours. So, um, whatever we’re feeling, they’re feeling it way worse because they make less money than us. Surprisingly per person in Sydney, but the house prices are more than double and their loans are about It’s 60 percent more than ours.

So if they’re feeling it, we’re always going to be insulated by the fact that the RBA will probably never send them into poverty or recession. So we will always have that buffer. Buffer. Yeah. Whatever you’re feeling here in WA, the bizarro version of you is feeling it even worse in Sydney. In Sydney. Yep.

That makes sense. Yeah. So to that point, uh, will prices drop because of interest rate rises? Prices can only drop if sellers need to sell more than buyers need to buy. Now, there are some people who may need to sell because of, uh, cash flow issues. But, uh, stats show that that’s not very many people in Perth.

Because, uh, whilst it is getting less affordable, it’s still an unaffordable tone of property. We’re all getting pay rises, most of us, over the last couple of years. And, for sellers to need to sell more than buyers need to buy, uh, you’ve seen the desperation out there on the buying side. Sellers would really need to sell.

And that’s just not the case. Given how tight supply is. Most sellers are actually deciding not to sell because they perceive the value of their house will be increasing. By not selling over the medium term, so there is no supply for that reason for the reason that there’s no mobility Even if you wanted to sell you don’t know where you can buy and so people are sitting on their hands And that’s what’s creating this price growth environment now.

Jaimi: We’ve spoken about Supply and demand touched on affordability and interest rates is there anything else? on the topic of the market that is important for first time buyers to 

Trent Fleskens: know. Recognise that this is the biggest investment you have ever made, might ever make in the future, and that you want that investment to be A smart one, not just an impulsive one.

You might get free stamp duty this time, but if you don’t like the house you’re living in, you want to move in two years, it won’t be free next time. And that stamp duty costs you about 5 percent of the cost. And selling costs about 2%. So, you want to minimise the amount of times. That you’re buying and selling, transacting on properties for your home in your life, because it’s just wasted money that you give to the government.

So make good decisions. Make sure that the house you’re building, you can afford, obviously, is in a location that you think you will want to be in for at least 10 years. Uh, things change, but plan for 10 years and make sure it’s to a quality level that you’ll be happy with for that time frame. Don’t cheap out just because you’re looking at the minimised numbers here, but also recognise that.

You know, the price to build a home has gone up 50 percent in the last three years. What was 250 is, is now, you know, 350. What was 500 is now 750. All those things are just a reality and if anyone is… out there expecting prices to drop materially by waiting another six months, well, you will be very unhappy.

Shocked when it doesn’t happen. It’s just not happening. It’s not going to happen because of the demand and supply situation we’ve spoken about. And that is the demand and supply of trade labour and trade supply. 

Jaimi: Trent, for people who are looking to get out of the rental market and get their foot in the door into the property market as a first home buyer, What do they need to do or look out for, and when is a good time?

Trent Fleskens: So, in a rising market, one which is running away from people on a daily basis, notwithstanding what I said about making sure you build the home that suits you, you should be looking to get in that market as soon as possible. Now, uh, am I a huge advocate for… Um, products like Keystart or low deposit loans.

I’m not really. I’d prefer that you had more security behind you. However, I have seen many examples where smart decisions have been made in terms of location and product that have been coupled with a low deposit loan in a rising market has been refinanced out within the space of a year and a half.

I’ve saw a couple of lads who bought a property in Craigie. Two and a half years ago with a 2% loan. And, uh, Craigie has increased about 30% in that time. Wow. And they were able to refinance out to a big fall lender without having put any more than their p and i in at that time. That’s awesome. And now they’re not paying key start rates anymore.

Yeah. So Keystart is. beast that you need to be very aware of the risks and benefits for. If you have made a smart decision, you can use it to get on a rising market that you can obviously use leverage to make great gains from, but if you’ve gone and bought a property, that’s in a We can market with, you know, oversupply of a similar product.

That’s a risky job, right? So, I would certainly be looking for opportunities. If I was a first home buyer right now, I would be aiming to be as close to the city as possible. Or, or as close to water. Um. Yeah, the beach. Yeah. If you can find it in infill land, it seems sexier and more interesting, I guess, to be in the land estate.

What you’re doing is you’re investing into a market with similar people in fairly vulnerable cash flow positions and savings positions where these will be the first people to go to be under mortgage stress in times, right? So, you want to be, if you can be, the crudest way I can say it. The poorest person in your suburb.

If you can get, if you can get into the best, and it’s a different way of saying getting into the worst house on the best street, right? Because then the fundamentals of value in your market will be determined by people far more, far better off than you. And therefore, you’ll probably have better growth because those people will be able to afford to pay more money for their sort of properties.

You’ll benefit from that. If you’re living or buying into an area that has people that are similarly, Sort of just getting on their, on their, their feet, um, you’re not going to see that same upside because there just isn’t the capacity for those people to do that. Yeah. So if I was a first home buyer right now and I was looking to buy a property, I’d be buying an infield block of land that someone subdivided and building a home in the best suburb I could possibly imagine.

Jaimi: I think that wraps us up today for our episode. Trent, thank you so much for having me in your studio and taking the time to record this episode today with me. 

Trent Fleskens: No worries, Jaimi. Good luck. 

Jaimi: Thank you so much for tuning in to the Home Building Like a Boss podcast. I hope you enjoyed today’s episode and learned something new.

Jaimi: Remember, you’ve got this and I’ve got your back. Until next time, stay inspired, stay informed, and stay confident on your building journey. I can’t wait to chat with you on the next episode. Don’t forget to check out the show notes for more information and free resources. If you haven’t already, hit that subscribe button so you never miss an episode of the Home Building Like a Boss podcast.