National Property Market Update : Spring 2017

Boy have things changed in the property markets over the year.

Growth is stalling, so what's ahead for the year?

Today’s show is going to answer this question plus more.

It is a special edition of my weekly show and I'll chat with four experts who share their “on the ground” knowledge as we do our Spring State by State property market update.

Today’s discussion includes:

• What’s really going on in Australia’s major capital city property markets
• We answer the question: Is the market consolidating before another rise or have we reached a peak?
• We show you how property prices don’t always go up.
• We explain how we are at a time of increased risk and volatility.

Ken Raiss, Director of Metropole Wealth Advisory – The Economic Context

1. The global economy is improving and the labor market is strong.
2. Low wage growth is restraining spending.
3. China is growing at a reasonable pace driven by infrastructure and property spending.
4. China has a moratorium on sending money overseas.
5. The US has one of the stronger economies and is slowly raising interest rates.
6. The Australian economy is going through a bit of a rough patch, but improving.
7. We are seeing low wage growth and higher prices particularly in energy and health.
8. Business confidence is high, but this has not translated into hiring new staff or increasing wages.
9. Interest rates aren’t expected to rise at least in the second half of 2018.
10. People pulling money out of their savings has put a damper on things.

Kate Forbes National Director of Property Strategy – Metropole Melbourne

1. Melbourne has been the best performing property market over the last 20 years.
2. Population growth and job creation have been strong fundamental drivers.
3. Migrants have been coming to Melbourne for all the permanent jobs creates by the strong economy.
4. It’s not too late to get into the market, but correct property selection is critical – it needs to be an investment grade property .
5. The location of the property is paramount.

Ahmad Imam Senior Property Strategist – Metropole Sydney

1. Sydney property prices have grown 13% over the last year, but the markets are fragmented.
2. Property price growth has been stronger in the inner ring suburbs.
3. Capital gains in those pockets that had strong growth are being weighted down by affordability constraints.
4. The lower end of the market will benefit from first home buyer incentives.
5. The growth has been driven by strong population growth and skilled migration.
6. Property is also a popular asset class for baby boomers leading up to retirement.
7. It’s not too late to buy, but now more than ever you have to buy an A grade asset.
8. Strongest and most stable growth in existing and established apartments. Small to medium density boutique style complexes.  
9. There is also strong growth in townhouses and detached houses at the upper end.

Brett Warren Senior Property Strategist – Metropole Brisbane

1. Brisbane has grown about 3%. The housing market has been performing strongly.
2. Brisbane lost job growth and the population growth struggled.
3. The population growth and job growth are picking up.
4. There is also infrastructure expansion which is a positive for investors and homeowners.
5. Better performing areas have fundamental drivers of good infrastructure, employment, walkability, and good schools.
6. Be careful of buying in the Sunshine and Gold Coasts.
7. Investment opportunities in the good pockets and employment hubs.

The Other Capital Cities

1. Canberra home values have increased about 8% over the last year.
2. Darwin values are down and likely to keep falling a little. Values are 18.6% lower than its peak. This is a market best avoided.
3. Property values in Hobart increased by 13.6% over the last 12 months. The economy is also starting to pick up. There has been short term growth, but very few long term growth drivers.
4. Perth markets are still languishing with significant over supply. Dwelling values have fallen. I’m not convinced that this is a good place for counter cyclical investing.
5. Adelaide markets are very fragmented. Property values have increased, but there are very few long term growth drivers. There are better places to invest.

Links and resources:

• Michael Yardney
• Metropole
• Ken Raiss
• Kate Forbes
• Ahmad Imam
• Brett Warren
• APRA

Quotes:

“I’m an investor not a speculator.” Michael Yardney

“The vast majority of our economy growth is in the capital cities and that’s where 80% of our population live.” Michael Yardney

“I would avoid investing in areas that aren’t capital cities as the gap between our large centers of economic growth and our regional markets is going to keep widening .” Michael Yardney

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