National Property Report May 2013

By MoneyQuest
In Market Report, Real Estate

NEW SOUTH WALES

Premier State shows power to surprise

NSW Property, and the state economy at large, is looking markedly better than a year ago and there’s two reasons for it:

Area

Type

Median Price

12 month Growth

Growth over three months

Gross Rental Yield

Rent amount

Sydney

H

$627,500

8.5%

10.1%

4.0%

$480

NSW country

H

$344,000

1.5%

7.2%

5.0%

$330

Sydney

U

$490,000

4.3%

4.6%

4.8%

$450

NSW country

U

$295,000

0.0%

3.7%

5.3%

$300

Source: RP Data, Feb 2013

Amid the tidal wave of negative media reports last year about the apparently doomed economies of Europe and North America, Australians are increasingly waking up to a reality of their own. The evidence for it has been there all along, but there’s a different feeling now. People are taking it to heart. And in New South Wales it is making a big difference.

“This reality is that many of those [overseas] markets have little impact on the Australian economy at all,” says Tim McKibbin, chief executive of the Real Estate Institute of NSW (REINSW).

McKibbin believes the fact that Australia’s economic performance fared better than Europe and the USA last year is slowly starting to sink in for most everyday Australians, and this has resulted in a marked improvement in sentiment.

“Over the last six months, Australians have realised that our economy and our trading partners are reasonably robust. The confidence that has come from that realisation has begun to surface and is evident through an improvement in the share market,” he says.

McKibbin adds that the effect of improving sentiment should never be underestimated, especially in NSW. Australia’s Premier State has seen two sectors of its economy struggling of late – retail and housing construction – and the performance of both rely heavily on consumer confidence. Up until this stage, sentiment had been largely negative, but a more confident consumer outlook will do much to repair these sectors.

As Australia’s most heavily geared state, NSW has also had a lot to benefit from interest rate cuts. McKibbin says they have breathed new life into the property market and the state economy as a whole.

“We’ve seen an improvement in property prices and the NSW government announced that employment rates are also improving,” McKibbin says.

This is evident in RP Data figures which show Sydney median house prices have grown 8.5% in the 12 months to February, while unit prices have also enjoyed a good run at 4.3% growth. The three months to February were kind to areas outside of Sydney too, with median house prices growing 7.2%.

VICTORIA

Melbourne: get in while it’s cool

With the next growth point projected, strategic investors have the rare chance to time their entry into the market to buy just before Melbourne starts growing again

State

Type

Median value

12 month Growth

Growth over three months

Gross Rental Yield

Rent amount

Melbourne

H

$490,000

-2.8%

4.3%

3.8%

$360

VIC country

H

$275,000

-0.7%

-1.1%

5.2%

$275

Melbourne

U

$425,000

-1.4%

1.4%

4.3%

$350

VIC country

U

$230,000

-0.8%

0.0%

5.2%

$230

Source: RP Data, Feb 2013

If there is anything the last 10 years of property price movements have shown it is that affordable opportunities don’t last. This should be a pause for thought for anyone interested in investing in Melbourne.

Despite being named Australia’s second most expensive city by living costs in an Economic Intelligence Unit study, Melbourne property prices remain cheaper than some of its large city contenders and appear to be hanging back, at least for the moment.

The current median house price of $490,000 is cheaper than Sydney, Canberra, Perth and Darwin (and Sydney units), as well as just a fraction more expensive than Brisbane. This is a far cry from early 2010 when Melbourne was a good length ahead of the pack, second only to Sydney in median house price rankings.

Of course, Melbourne property may still be a long way from what could be considered an affordable market, but a fair enough assessment would be that prices are more affordable, comparatively speaking, than they have been in a long time. And with city property prices projected to remain fairly flat until 2015 (QBE LMI forecasts 1% growth over 2013 and 2014), investors shouldn’t bemoan the lacklustre rate of capital growth – they should be on the lookout for opportunity.

“Opportunities don’t last, so act while properties are still within your reach,” advises Tim Fletcher, director of Fletchers Real Estate. Fletcher says many areas that were once heavily in demand, but have remained dormant in recent memory, could one day have a return to growth and buyers should always be aware that once they start surging again the cheaper opportunities to buy will have past.

Considered this way, flat growth in the next two odd years gives investors a great advantage. “Right now, you can be patient,” says buyer’s agent Graham Holding. “There is still a lot of bad grade investment stock coming onto the market, but you can wait for only the good opportunities to come and you can negotiate a favourable deal for yourself.

“That’s not a freedom you’d get in a place like Gladstone, or wherever, because when a market is soon going to boom or is booming you’ve got to be decisive, you’ve got to be quick on the draw. That’s a hard thing for many people to do.”

QUEENSLAND

Gold Coast ambitions

The 2018 Commonwealth Games are continually nagging the question: is there an end in sight for Gold Coast property’s woes?

Area

Type

Median Value

Growth over 12 months

Growth over three months

Gross Rental Yield

Rent amount

Brisbane

H

$445,000

-0.1%

1.1%

4.5%

$385

QLD Country

H

$379,000

-1.0%

0.0%

5.1%

$375

Brisbane

U

$370,000

-0.5%

-1.4%

5.2%

$370

QLD Country

U

$310,000

-4.0%

0.0%

5.5%

$330

Source: RP Data, Feb 2013

Standing on Surfers Paradise Boulevard, amid the incessant buzz of tourists and revellers and some of Australia’s tallest skyscrapers, it’s hard to imagine that in many ways this city has been Australia’s hardest hit urban market for the last few years.

The Gold Coast, often considered Australia’s playground because of the great surf, casinos, outdoor entertainment and drunken schoolies, has witnessed a downward spiral in prices that has lasted almost the full course of this decade. Nearly all regions of the city have been affected, with fingers pointed at a softening local economy and a high Australian dollar as the culprits.

RP Data figures alone paint a picture of a city property market in a state of crisis. Since late 2010, the city-wide median property value has been reduced by approximately $50,000, implying that just about anyone who purchased real estate at that time is paying off a property that is now worth less than what they paid for.

ANZ head of property research Paul Braddick says that unlike other parts of Queensland, which are benefitting from a high-flying resources industry, the Gold Coast remains weak – not just in the property outlook, but in the wider economic outlook as well.

“The Gold Coast has been witnessing further falls in houses prices as a result of sluggish conditions in its local economy,” he says. “The areas that are heavily dependent on tourists have been struggling most and the problem is that the strength of the Australian currency means that the domestic tourism that would have come there is now just going offshore.”

WESTERN AUSTRALIA

Perth property a powerhouse

As property investors along the eastern seaboard increasingly turn their attention to the western state, the best place to park investment dollars may not necessarily be in mining towns 

Area

Type

Median value

Growth over 12 months

Growth over three months

Gross rental yield

Rent amount

Perth

 

H

$497,000

2.1%

3.5%

4.6%

$440

WA country

H

$380,000

0.0%

0.0%

4.5%

$330

Perth

 

U

$405,000

1.3%

1.3%

5.1%

$400

WA country

U

$325,000

-3.0%

0.0%

5.3%

$330

Source: RP Data, Feb 2013

A growing number of interstate investors are choosing to leverage their hard-earned funds into the Western Australia property market, and for good reason.

“Just in terms of overall investment, WA is a powerhouse,” confirms Andrew Peterson from NextHotSpot.com.au.

“In dollar terms, WA attracts far more resource investment than any other state or territory in Australia.” 

The state’s appeal to property investors is the double whammy of strong capital growth predictions and increasing rental yields, adds Ryan Crawford, managing director of the Crawford Property Group – which when combined, is giving would-be landlords “growing confidence in the Western Australian property market”.

“Investors are beginning to understand that on a national basis, Western Australia now offers some of the best rental returns and potential capital growth rates in Australia,” he says. “The economy is mining-based and the Perth property market is starting to benefit from the impact of the massive investment in the resources sector. This impact is very apparent in suburbs surrounding Perth airport, where there is now a huge demand for rental accommodation from fly-in fly-out (FIFO) workers, and property values in these suburbs are now beginning to surge.”

SOUTH AUSTRALIA

A spring in Adelaide’s step 

It may be ranked Australia’s most liveable city, but does Adelaide cut the mustard as an investment destination?  

Area Type Median Value Growth over 12 months Growth over three months Gross rental yield Rent amount
Adelaide

 

H $390,000 -1.3% 2.6% 4.4% $330
SA Country H $265,000 -1.8% 1.4% 4.9% $255
Adelaide

 

U $325,000 -1.8% 1.4% 4.6% $250
SA

Country

U $160,000 -5.4% -5.9% 6.3% $195

Source: RP Data, Feb 2013

According to the Property Council of Australia’s My City: The People’s Verdict poll, Adelaide has claimed the title of Australia’s most liveable city for the third consecutive time.

Property Council chief executive Peter Verwer says the survey, which canvassed opinions from almost 6,000 people across the country, demonstrates how important it is for government leaders to focus on improving and delivering services like education, a vibrant cultural scene and recreational outdoor areas.

“Australians want more liveable cities and they know that the performance of our cities is critical for our future economic prosperity,” he says.

Adelaide’s liveability endorsement is more good news for a city where local real estate agents are finally beginning to report a more robust buying and selling market. RP Data figures appear to back up anecdotal evidence of market conditions improving, with quarterly growth rates of 2.6% for houses and 1.4% for units.

“Our members are saying that the first few months of the year have started to show some promising signs that housing stock is starting to move, and low interest rates are no doubt an important factor in purchase decisions,” explains REISA president Greg Moulton.

“After a tough few years, it is good to see a spring in the step of the market. While the recovery won’t be overnight, incremental increases in volume is what is needed to boost the market.”

TASMANIA

Back to square one?

The property outlook for the rest of the year remains bleak for the Apple Isle, despite improving consumer confidence and stabilising growth rates

Area Type Median Value Growth over 12 months Growth over three months Gross rental yield Rent amount
Hobart H $331,500 -1.5% 3.4% 5.2% $330
TAS Country H $249,000 -1.8% 2.6% 5.5% $250
Hobart U $265,000 -4.3% 1.5% 5.5% $280
TAS Country U $206,000 -4.3% -7.6% 5.6% $220

Source: RP Data, Feb 2013

The economic situation is so dire in poor old Tassie that when Deloitte Access Economics put out a recent Business Outlook report, they had to invent new lows on their graph to explain the economic data.

“We’ve had to change the axes to go lower than we have ever gone before,” Deloitte confirms of the report, which reveals that Tasmania’s stagnant population is doing little to help the state to get back on its feet.

“Prospects are better elsewhere and that’s encouraging people to leave,” the report says. “But when they do leave that cuts demand even further, increasing the economic headwinds for the state.”

Andrew Peterson from NextHotSpot.com.au says that locals may be able to spot genuine, under-market buying opportunities within Tasmania, but interstate investors will generally be able to find better places to direct their dollars.

“If you are a local and know your area well enough to identify an opportunity, then fair enough, but we see better areas of growth for most investors,” he says.

“While it’s no doubt a wonderful place and I’ve got some friends and family that live there and love it, unfortunately as an investor, it’s not your best investment destination. It’s an export economy and that includes tourism, seafood and dairy, and these industries are heavily impacted by our high Australian dollar, which is really hurting the economy.”

NORTHERN TERRITORY

Up, up and away

Just when you think prices in NT may have reached their peak, the property market delivers another growth spurt

Area

Type

Median value

Growth over 12 months

Growth over three months

Gross rental yield

Rent amount

Darwin

H

$550,000

12.9%

4.8%

5.6%

$590

NT Country

H

$416,250

-3.7%

8.4%

6.2%

$500

Darwin

U

$420,000

3.1%

-0.7%

5.7%

$460

NT Country

U

$328,500

-3.5%

4.3%

6.3%

$400

Source: RP Data, Feb 2013

Somewhere between “a booming frontier town and an emerging provincial capital city”, Darwin and Palmerston property markets are benefitting from unprecedented growth and investment in resources industries, confirms Andrew Peterson from The NextHotspot.com.au.

“The resources investment in the NT is something like 150 times the per capita spend that Victoria or NSW is getting,” he explains, adding that Darwin and Palmerston “each have unique investing dynamics” in their own right.

From a property investment point of view, this translates to opportunities aplenty to secure good-quality properties that attract high returns and strong capital growth.

That is, provided you have deep enough pockets to invest in the NT in the first place.

As Real Estate Institute NT chief executive Quentin Kilian points out, it’s not the cost of borrowing money that is in issue, it’s “the cost of purchasing the property”. Sourcing funds to cover a deposit, stamp duty and other buying costs for a $600,000 home easily chews through the better part of $100,000 – and how will mortgage holders cope, Killan wonders, when interest rates do eventually rise?

Yet, buying activity continues unabated in the top end, as it seems investors are keen to secure a piece of the action.

“With around 3,000 construction workers for the Inpex gas project expected to start arriving this year, Palmerston seems the logical place for them to live,” Peterson says.

“It’s got very low unemployment, great lifestyle options and low rental vacancies. In broad terms, there’s a lot going on and I think it’s only going to get stronger.”

AUSTRALIAN CAPITAL TERRITORY

Growth slows as election creeps closer

More than 6,000 jobs are potentially on the chopping block in Canberra, promoting a flat property market while locals wait for the results of the upcoming federal election

Area

Type

Median Value

12 month Growth

Growth over three months

Gross Rental Yield

Rent amount

Canberra

H

$550,000

0.9%

3.1%

4.9%

$515

Canberra

U

$415,000

-1.4%

1.2%

5.4%

$430

Source: RP Data, Feb 2013

If you’re employed by the government and live in Canberra, it’s a safe bet you won’t be taking out a mortgage soon. Canberra’s primary industry is essentially centred in politics, and up to 6,400 public service jobs could be shed by year’s end – depending on which political party wins the September federal election.

“Over the long term, Canberra has broadly performed well – it’s historically been a strong market for capital growth, and one of the most consistent performers of any major city in Australia,” says Andrew Peterson form NextHotspot.com.au.

“One of the reasons it’s been so resilient is that the primary business of Canberra is government, and there are no recessions in bureaucracy.”

About as close as Canberra gets to a recession, however, is when there are large-scale layoffs in the public service.

“It’s a widely held view that the Howard government’s sacking of over 10,000 public servants in 1996-97 was largely responsible for a decrease in Canberra’s house pricing, which dropped 20% in some areas at the time,” Peterson says.

“There’s a better than even chance that we’ll get a coalition government this year, and Tony Abbott believes we’re about 20,000 public servants too heavy.”

Of those 20,000 public service roles, around 6,400 are based in Canberra, meaning around 4% of the local workforce will be looking for a job.

That doesn’t mean investors should shy away from Canberra altogether, Peterson clarifies: the city has been “resilient in its long-term growth and it still outperforms most other capital cities”, he says.

Peterson adds that worthwhile opportunities may still crop up, but investors should be patient. “Prices aren’t going to jump in a hurry,” he says. “I certainly don’t think you’ll lose anything by holding off, but there’s a fair chance you may get something a bit cheaper if you wait until later in the year.”

 

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