PROPERTY REPORT – DECEMBER 2016
Quarterly Market Report No. #41 – December 2016
By Terry Ryder, creator of hotspotting.com.au
Introduction: Expect Change And Surprising Outcomes In 2017
This time last year I suggested 2016 would be a year in which the smaller cities emerged, as the larger ones showed signs of fading.
In many respects that has proven to be true. Sales activity has fallen markedly in both Sydney and Melbourne and most research sources have recorded a decline in the rate of price growth in Sydney.
Meanwhile, Hobart has produced quite strong numbers for price and rental growth, as has Canberra. Sales activity has been solid also in Adelaide and Brisbane, and some precincts in those cities have delivered good price growth – although the average rate of growth has remained moderate.
So now my thoughts turn to the New Year and speculation about what will occur in 2017. This report is devoted to discussing prospects in major markets around Australia in the year to come.
In simple terms, we can expect very different scenarios to those in 2016, with outcomes that will surprise some people.
Brisbane and Queensland
Queensland Will Have Several Standout Markets In 2017
There are many good reasons to believe that Queensland is the place to be for property investors in 2017. If not the place, then certainly one of the places.
As we approached the end of 2016, there were signs of the following events emerging to positively influence Queensland property markets:-
- A lift in the state’s population growth rate
- An improvement in the state economy
- Significant increases in key commodity prices, especially for coal
- A rise in infrastructure spending
- The bottom of the trough being reached in regional markets impacted by the resources sector.
In addition to that, there are signs of growing interest from property investors. A recent survey by PIPA asked investors, amongst other things, which market they now favoured for future growth. Half nominated Brisbane, while only 11% opted for Sydney. That result shows how much things are changing in major property markets around Australia.
Brisbane markets have been cantering along for the past couple of years without ever breaking out into a sprint. But as the Queensland economy improves, boosted by rising commodity prices, a strong tourism industry and a revival in population growth, Brisbane may start to deliver more in the way of price growth.
Investors need to be careful about the apartment markets in Brisbane, especially the inner-city sector, where vacancies are high and likely to get worse before they get better. There are also rising vacancies in some suburban markets because small to medium sized developers have been building lots of units and townhouses – too many – in suburbs like Albion and Chermside.
Beyond that proviso, Brisbane is a busy market with the potential to produce more in the way of price growth in 2017, if some of those signals mentioned earlier prove accurate.
We have also seen an uplift in sales activity on other key markets of South-east Queensland. The two most upwardly-mobile markets in Australia in the second half of 2016 have been Brisbane’s coastal book-ends: the Sunshine Coast and the Gold Coast.
Both the coasts are being boosted by strong local economies, major spending on infrastructure and highly-active construction industries. The outcome is a big increase in jobs and, arising from that, rising demand for real estate accommodation.
The Sunshine Coast rates more highly at present because, despite being a smaller city, it has more suburbs with growing sales activity than the Gold Coast does. The Sunshine Coast is being driven by over $20 billion in infrastructure and real estate developments and offers plenty of affordable real estate at good rental yields.
The Gold Coast has a very busy real estate market, with infrastructure spending a big factor, as well as high-rise construction, which is creating lots of jobs. The 2018 Commonwealth Games is providing some of the momentum.
Investors are urged, however, to avoid the high-rise markets which are heading for another bout of oversupply – and concentrate instead on the housing markets inland.
Toowoomba has shown growth in recent years and passed its peak a year or two ago. But it remains a strong regional economy and may surge again on the back of infrastructure spending.
Regional centres which dived because developers over-built – and, in some cases, because the coal industry declined – may be at the bottom of their down cycle, or close to it. Reports from two different groups, SQM Research and Herron Todd White, have suggested that the worst may be over for locations like Gladstone, Mackay and Emerald.
Certainly, if the rise in commodity prices continues, that will help their revival, because a number of mothballed mining projects are being transferred from the backburner as a result of that news.
Ignore Media And Conduct Genuine Research To Succeed In 2017
Whenever I speak to a live audience around Australia, as I often do, question time always reveals that consumers have their heads full of misinformation. Most of what people think they know about real estate comprises (mostly) myths and misconceptions.
This happens because most people think “research” consists of reading newspapers and absorbing information from other “normal” media sources. In reality, the smartest thing a real estate consumer can do to be informed about investment is to switch off all forms of mainstream media.
Few of the people writing about real estate are experts. Many are hack journalists with limited knowledge of the subject and most of what they publish is a shallow re-write of someone’s press release. They compound their ignorance by seeking analysis from non-experts such as economists.
So here’s my simple three-step formula for success as property investors in 2017:-
- Step One: stop reading newspapers.
- Step Two: conduct genuine research.
- Step Three: be willing to pay for good information and quality advice.
All the information a consumer will ever need to make informed choices exists and most of it is readily available through Internet research.
The problem is that often data from one source conflicts with figures from another.
How to make sense of it? Seek advice from qualified businesses. Be willing to pay for it. All the successful investors I know have this in common: they treat real estate investment as a business and understand that you have to spend money to make money.
Most mum-and-dad investors don’t do that – and end up with ordinary results.