Let’s take a look at where the property market is at across the main capital cities – Sydney, Melbourne, Brisbane and Perth and discover where we see potential in the market.
Property Market Update August 2017
A crucial part of property investing is staying informed about things like interest rates, housing prices, regulation changes and city trends. Our quarterly ‘Market Update’ video series aims to provide you with all you need to know about property market issues.
Another crucial part of property investing is to avoid seeking property investments for a short or quick win. It’s about a medium to long term investment. We want it to work over multiple cycles, 15 to 20 years. Plus, it’ll get you the best outcome from a capital growth perspective.
With that said, we’ve compiled a property market update of the major cities across Australia with regard to where we see potential in invest. Without the aid of a crystal ball, we have to rely on our trusty metrics like median house price growth and population growth. Here’s a summary of our August 2017 findings…
Sydney’s Property Market Running Too Hot?
You don’t need to be Einstein to realise that Sydney is hot right now, and has been growing steadily since around 2012, 2013. As usual, there’s some really good performance in Sydney.
But it’s not where we’d be buying at present. It’s important to take into consideration that during the last major growth curve between 1998-2002, we saw a dramatic growth in Sydney. But then it sat idle for the best part of the next ten years before resurging for the past four years.
Now the media is up in arms about Sydney being unaffordable, that it’s inflated, it’s in a boom. We hear this rhetoric frequently, but really it’s just a case of history repeating itself.
Bear in mind that you don’t want to buy at the very top of the market because then you’ll have to wait a good ten years to see any major growth. It might give you some comfort to buy in a hot market and one that’s been strong for several years but it won’t be the best recipe for ongoing growth.
Strong Price Growth in Melbourne
Melbourne is once again lagging behind Sydney by about 12-18 months, but it’s definitely a hot property market right now. There’s a lot of activity and our clients and Melbourne residents have noticed some really strong price growth.
A major factor to consider is population growth, which is easing in Sydney purely due to affordability; if jobs are available in Sydney, Brisbane or Melbourne then typically that population growth will occur where housing is more affordable.
Enter Melbourne, which has benefited from the decline in Sydney’s population. Roughly 80% of all of the job creation in Australia is in Melbourne and that’s obviously what’s fuelling the rise in house prices.
Brisbane Running Hot & Cold
Brisbane is, in some ways, really taking off. The best way to summarise Brisbane at the moment is to highlight the differential between house growth and unit growth. House prices are up about 4.5%. Units are actually down.
That’s mostly just a case of supply and demand, which comes as no surprise. The large oversupply of apartments in Brisbane has been reported in the media a fair bit lately and it makes sense not to invest in apartments there at the moment.
Despite the house price rise, Brisbane still lags behind Sydney and to a lesser extent Melbourne in terms of median house price growth. In fact, the last time we saw such a big differential between Sydney and Brisbane was back in 2001.
Like Sydney’s 1998-2002 boom, which saw price growth of over 80%, Brisbane’s median house price also more than doubled between 2001 and 2004. And judging from where today’s markets are placed (we don’t know exactly whether they’re at the top or bottom of the curve) Brisbane appears well placed to see some growth over the next three to five years in our opinion.
Another interesting point is the net interstate migration, up 80% in Brisbane, partly due to affordability. For example, a Sydneysider who gets a job opportunity in Brisbane could sell their median house for $1.1m and buy the equivalent in Brisbane for $550-600k and pocket the difference, while still earning a similar income.
2001 was the last time net interstate migration was dramatically up in Brisbane, further evidence that it may be at a growth stage in the cycle.
Perth Shows Promising Signs
Perth’s been flat and has been for some time. Its median house prices continue to lag behind Sydney and Melbourne. However, the good news is that the two indicators we put it on our radar about 12 months ago are starting to trend in the right direction.
One of the key data criteria we’ve been looking at is the unemployment rate, which has decreased from over 6% to 5.6%, the second lowest behind Sydney of the four main capital cities. The second indicator we’ve been monitoring is vacancy rate, which has been trending down as well since January 2017.