The great Australian housing boom doesn’t look like it’s over.
Yesterday in Part 1, I gave an overview of our national property markets and details of what’s happening in our 2 biggest capital cities.
Let’s now continue with our whip around the Australian property markets.
Median house price: $495,200; 4.9% increase in last 12 months.
Median unit price: $398,00; 0.5% increase in last 12 months.
Vacancy Rate: 2.5%^
Having underperformed the combined capital city averages over the last 10 years Brisbane was tipped by many as the property market to be in last year.
While it gathered momentum and market turnover has increased, it is still underperformed Melbourne and Sydney last year, but is likely to exhibit similar growth to the two big capitals this year.
Shannon Davis, director of Metropole Property Strategists in Brisbane commented:
“Brisbane’s property markets have performed steadily, but not spectacularly, over the last few years. The lower Australian dollar and improved tourism outlook has generated jobs in the hospitality and tourism industry this in turn should lead to increased interstate migration.”
“There has been a resurgence of property investor activity over the last six months, with interest being particularly strong in the mid price range, inner and middle ring suburbs of Brisbane.”
“Melbourne and Sydney investors are beginning to consider Brisbane where price growth has lagged the southern states. With property prices around 50% cheaper than Sydney and higher rental yields, there is still a lot of upside for Brisbane properties.
“Clearly Brisbane is not the hot spot that some projected meaning correct property selection is critical. In particular I’d be wary of inner city and near CBD apartments where an oversupply is looming. However, houses near the city will provide the best yields and strong growth potential.” said Davis.
Median house price: $510,000; -2.0% fall in last 12 months.
Median unit price: $420,000; -1.9 % fall in last 12 months.
Vacancy Rate 3.9%^
After a long period of strong capital growth, the Perth housing market has recorded a significant slowdown, being the worst performing capital city market over the last 12 months and these conditions are likely to continue with falling population, rising unemployment, transaction numbers falling, decreasing confidence centre risk of oversupply in the Perth apartment market.
Real (inflation adjusted) property prices are 3.9% below their previous peak (June 2010.)
Perth also has the highest vacancy rate of any capital city.
My expectation is that the Perth property market will fall further during 2016 but may bottom out later in the year.
In my mind it is a little early to consider counter-cyclical investing in the Perth property market.
Median house price: $443,500; 3.3% increase in last 12 months.
Median unit price: $340,000; 2% increase in last 12 months.
Vacancy Rate: 1.9%^
Adelaide’s housing market has performed in a steady stable fashion, regardless of what’s happening in the wider economy.
While Adelaide had its best year in a while over the last 12 months demand for property remains subdued with activity driven more by necessity than desire to upgrade or invest but real (inflation adjusted) property prices are 4.4% below their previous peak (June 2010.)
The Adelaide market is insulated from the APRA related lending crackdown, as it is being supported a higher proportion of owner occupiers than investors, but there is a potential of oversupply due to ongoing construction.
Median house price: $540,000; -1.5% fall in last 12 months.
Median unit price: $465,000; -2.9% fall in last 12 months.
Vacancy Rate 3.6%^
The Darwin property market performed strongly a few years ago, driven by solid investor sentiment, but their love affair with the Northern Territory is long over.
Prices are still falling, but at a slower rate and they’re likely to keep falling for much of this year. I’ve always found investor driven markets more volatile than our big capital cities and that’s why I avoid them.
Real (inflation adjusted) property prices are 11% below their previous peak (March 2011.)
Median house price: $361,000; 4% increase in last 12 months.
Median unit price: $261,200; 13.3% increase in last 12 months.
Vacancy Rate: 0.9%^
Hobart was the best performing capital city over the last quarter (+6.5%) but it is really only playing catch up, as real (inflation adjusted) property prices are 7.5% below their previous peak (June 2010.)
Without a big economic shift to boost employment and sentiment there is little to suggest things will change in the long-term.However, in the long short term, rents are likely to rise because of Hobart’s very low vacancy rate.
Median house price: $597,500; 1.9% increase in last 12 months.
Median unit price: $415,000; – 0.9% fall in last 12 months.
Vacancy Rate: 1.3%
The Canberra market is likely to have difficult year in 2016 with the political uncertainty surrounding the upcoming election affecting it’s housing markets.
The Canberra inner-city Apartment market is still subject oversupply this is causing a weakness in overall unit prices.
Real (inflation adjusted) property prices are just 3.5% above their previous peak (December 2010) in Canberra.
The bottom line is…you can’t just buy any property.
It’s a myth that property values double every 7 to 10 years.
While they say a “rising tide lifts all ships” clearly there are some property markets and certain properties that have had minimal growth over the last few years while others have enjoyed massive growth.
While the overall property market is comfortable, it’s a bit like me putting my left hand in a bucket of cold water and my right hand in the bucket of hot water and saying overall I feel comfortable. Some segments of the property market are hot and others are cold and the fragmentation of these markets is unlikely to change over the next year or so.
This means home buyers and investors will have to undertake careful due diligence and make sure they buy the right type of property…
One that has a level of scarcity, meaning it will be in continuous strong demand by owner occupiers (to keep pushing up its value) and tenants (to help subsidise your mortgage); in the right location (one that has outperformed the long term averages), at the right time in the property cycle and for the right price.
Then hold it as a long-term investment and reap the rewards.
Author: Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.