» Simon Pressley

Could this regional city be the next property hotspot?

Simon Pressley — Mon, 19 Aug 2019 06:54:28 +0000

A high proportion of property investors often overlook regional locations which offer great potential. Right now, one of the strongest property markets in Australia is the inland regional Victorian city of Mildura. Mildura’s 7.8 per cent increase in median house price over the last twelve months is superior to all Australian capital cities. Only Hobart, Canberra and Melbourne have produced a higher rate of capital growth over the last three years. You’ll get change from $300,000 for a good quality house in Mildura and the 6.1 per cent median rental yield, regardless of the size of your deposit, puts a standard investment property in cash flow positive territory. While several capital cities are currently feeling the pinch from housing over-supply, Mildura’s vacancy rate of 0.6 per cent is reflective of one of the tightest rental markets in the country. As for employment opportunities, the 6.9 per cent increase in job advertisements over the year ending May 2019 is higher than six out of eight capital cities. There’s no such thing as a ‘perfect’ property market however, as you’ll see throughout this Mildura Property Market Research Report, this location certainly ticks the right boxes. Mildura property market history Over the last twenty eight years, Mildura’s median house price has more than tripled from $78,000 in 1990 to $270,000 as at December 2018. The trend line in the below chart confirms how incredibly consistent the market has been for just shy of three decades, with the average annual growth over the period being 4.5 per cent. The largest property market downturn ever experienced in Mildura was in 2008 (the year of the GFC) when the median house price declined by just $10,000. Contrast this against the $225,000 decline in middle-ring Sydney over the last two years and one can only hope that property investors are now starting to re-evaluate Mildura’s potential. Over the most recent five years (ending March 2019), Mildura’s 25.6 per cent price growth is on par with Canberra and superior to Brisbane, Perth, Adelaide and Darwin. As for rents, according to CoreLogic, Mildura’s current median house rent is $320 per week. Rents have increased by 18.5 per cent over the last five years and 6.7 per cent over the twelve months ending March 2019. Mildura population Located on the Victorian side of the Murray River, Mildura is the largest settlement in the Sunraysia region. Mildura is an important service centre for dozens of smaller country towns within a 100-kilometre radius. During 2017-18 the inland city had a population growth rate of 0.8 per cent, equal to Adelaide and driven largely by overseas migration. The demand from overseas migration is led by skilled labour, particularly to support the region’s agriculture productivity. Mildura housing supply Based on Mildura’s average annual population growth over the last five years (477) and its average household size of 2.4 people, the base-level demand for extra housing in Mildura is 199 dwellings per year. According to Australian Bureau of Statistics data, an average of 293 new dwellings have been approved in Mildura over the last five years. On face value, the data suggests recent supply should have been sufficient for recent demand, but the reality says otherwise. Mildura’s dwelling stock increased by 428 between the Census periods – enough for an increased population of 1,027 people. However, ABS data shows the actual population growth across this period was 2,742 (1,715 more than supply accommodated for). For much of the last decade, roughly seventy residential dwellings were recorded as ‘vacant’, or a vacancy rate of just shy of 2 per cent. All considered, Mildura’s rental stock would benefit from an additional forty to fifty dwellings. Mildura property market outlook Mildura is a shining example of a regional location that continues to produce solid results. Advantages: Mildura is one of the most accessible property markets in Australia for owner-occupiers and investors Current housing under-supply places pressure on real estate prices Continuation of tight supply is likely to maintain pressure on prices Strong housing demand is driven by healthy local economic conditions and overseas migration to meet skills labour shortages Exciting outlook for the Australian agriculture sector presents a great opportunity for regional cities like Mildura Strong investor cash flow supported by high rental yields and prospect for further rent rises Disadvantages: Declining internal migration Property growth cycle is already underway, although this is no suggestion of the cycle being too advanced for new buyers to benefit from

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Is Australia’s apartment love affair like The Bachelor?

Simon Pressley — Mon, 21 May 2018 06:05:25 +0000

There’s an interesting relationship unfolding between the supply and demand of property markets in Australia’s biggest cities. I use the term ‘relationship’ loosely because what I’m referring to is about as scientific as that (un) reality TV show, The Bachelor. As we’ve seen over and over (make that ‘my wife has seen’ – I don’t watch the show), simply placing an attractive man and an attractive woman in a romantic hideaway is absolutely no guarantee that they’ll be compatible. It’s not that dissimilar in Australian property markets at the moment. It seems that developers and city councils are concocting their own version of The Bachelor. The plot goes something like this ‘… our population is growing, they all need to live somewhere, we’ll whack up as many high rises as we can, they’ll buy whatever we build.” They’ll all live happily ever after. Apparently! In Propertyology’s opinion, the enormous increase in the ratio of apartments to total new dwellings built in Melbourne, Canberra, Brisbane, and Darwin raises a big question mark over how these values might perform over the next decade. It’s one thing to question whether the total volume of new dwelling supply is equal to, above or below what is required to accommodate the increased population in different locations. It’s a completely different thing to evaluate whether what has been built is what the public actually want. There will always be an emotional connection between human beings, the style of dwelling that each household desires, and which part of town they want to live in. Developers don’t determine that, buyers do! According to official data, roughly 50 per cent of capital city households are families with children and, if anything, the average number of people living within each household is increasing. But for some inexplicable reason, the proportion of apartments to detached dwellings is increasing from three out of ten to almost one for one; in some cases, even higher. There’s no question that demand for apartments in Australia’s biggest cities is increasing however, the rate of apartment construction is occurring far too fast to be tested by those who they are being built for – the Australian public. For generations subsequent to the arrival of the First Fleet at Botany Bay in 1788, detached houses were the only style of dwelling built. Fast forward to 2016 (the last Census) and 43 per cent of Greater-Sydney’s 1,855,734 total dwelling stock were apartments and townhouses. And since the 2000 Sydney Olympic Games, six and a half out of every ten new dwellings approved were apartments. Evolution! Five consecutive years of record volumes of new (overall) supply may very well result in Sydney dwelling prices declining over these next couple of years. However, at least public demand for apartment living has been well and truly tested. Melbourne is a completely different story. The 2016 Census confirmed that 32 per cent of Greater-Melbourne’s total dwelling stock of 1,832,043 were apartments and townhouses. That’s quickly changing with the volume of apartments constructed over the last five years being three times higher than the long-range average. We already know about Melbourne’s population growth being phenomenal. We also know that supply of new dwellings has been at record high volumes for several years. But it seems that Melbourne developers and city councils have just rushed in and decided that they’ll marry the two together by assuming everyone has the same personality. From the start of 1985 to the end of 2017, Victoria’s average quarterly dwelling completions consisted of 7,281 houses and 2,711 apartments (9,992 total dwellings per quarter). In other words, for every ten dwellings completed, only 2.7 were apartments. From June 2012 to December 2017 (the largest residential construction boom in Australian history), the total quarterly volume of dwellings completed in Victoria increased significantly to 14,203. Detached houses represented 7,880 (much the same as the 33-year average) while 6,323 were apartments. For every new house built in Melbourne there’s now just shy of one new apartment built as well. The courting period for Melbourne’s growing population and the style of digs that they prefer to live in has not been long enough. While it’s clear that the property sector has a love affair with building apartments, the odds of a perfect match with the public is as scientific as The Bachelor. In contrast, Sydney dwelling completions during the five year residential construction boom produced a ratio of apartments to houses of slightly more than one (51.7 per cent). But the important difference is that Sydney is an extremely mature apartment market. Its relationship has been tested whereas Melbourne’s hasn’t. Melbourne’s median dwelling values have been consistently declining since January 2018; the large volume of supply of total dwellings has certainly played a part in this. But it’s the sudden structural change in dwelling style that Propertyology questions. 68 per cent of new dwellings completed in Canberra over the last five years were apartments and townhouses. And there’s more in the pipeline with 78 per cent of dwelling approvals over the last three years being for attached dwellings. That’s quite a step up from the 48 per cent three decade average. The proportion of attached dwellings completed in Brisbane (from 31.9 per cent to 42 per cent) and Darwin (41.7 per cent to 51.7 per cent) has also increased significantly. At the other end of the spectrum, only 15 per cent of Hobart’s dwellings are apartments and townhouses. Sure, apartments provide an affordable option for living closer to town. But suggesting that everyone wants to live in an apartment close to town is akin to only inviting six-foot tall brunettes on The Bachelor. Buying a property is the largest financial decision that most people ever make. People want to live in what they want to live in. It’s foolish to expect that thousands of people will fork out $600,000 plus on one asset that they’re not happy with. Maybe they’ll continue to rent. Maybe they’ll completely relocate to a different city where they […]

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Research reveals new housing demand hotspots

Simon Pressley — Wed, 07 Mar 2018 01:02:54 +0000

Contrary to general belief, population growth is not the biggest influence on property prices – far from it, in fact. There are a range of factors that influence the demand side of the property price equation. Aside from affordability, the biggest influence is economic conditions. Jobs. Jobs. Jobs! Propertyology’s recent analysis of national job data for the 2017 calendar year concluded that numerous locations across regional Australia may soon see considerable strength build in their property markets. In alphabetical order, Albury, Armidale, Ballarat, Ballina, Bowral, Cairns, Coffs Harbour, Dubbo, Mackay, Muswellbrook, Port Macquarie, Townsville, Warragul and Warrnambool are likely to see increased market activity over the coming year or two. A marked improvement in local economic conditions was a key driver that transformed 2011-12 property price declines in Sydney and Melbourne into boom markets over the last four years. Similarly, it’s not that long ago that Tasmania was in recession but the remarkable turnaround in its economy now sees Hobart as Australia’s hottest property market by a country mile. Sustained job growth within a community puts more money in people’s pockets, attracts new people to a region and boosts local confidence. It increases the chances of renters becoming home owners, provides home owners with confidence to renovate, increases demand for local goods and services, and gets more people at open homes. Tracking trends of job volumes is a more reliable measurement of the direction a localised economy is heading in, rather than looking at isolated unemployment rate. At a capital city level, Melbourne (10 per cent), Hobart (there it is again ~ 9.8 per cent), Canberra (8.7 per cent) have produced the largest increases in jobs over the last two years. While the measurement of job volumes is far from the only metric that Propertyology look at, it’s no coincidence that these numbers correlate with property market performance. While Brisbane is (finally) producing some encouraging employment data, inner-city jobs continue to reflect the post-mining boom pinch. The miserable 1.9 per cent increase in CBD jobs over the last two years is not the only disappointing data. CBRE recently reported that commercial office vacancy rates were 16.2 per cent (in other words, one in six Brisbane offices is empty). The significant number of regional locations that have produced rates of job growth above the two-year national average of 6.6 per cent is reflecting strong regional tourism, a very exciting outlook for Australian agriculture, advanced manufacturing (especially food-related), some good infrastructure projects, and a rebound in (parts of) the mining sector. The strong growth in retail, accommodation and food, and arts and recreation jobs reflect the sustained strength of Australian tourism. From 5 million international visitors in 2008, Australia is on target for 10 million by 2020. But, it’s more than the traditional holiday hot-spots of Sydney, Melbourne, Brisbane and the Gold Coast that people are now visiting. With more affordable airfares and a significant increase in destinations that now offer direct flights within one or two hours, tourists are exploring alternative attractions throughout Tasmania and mainland regional Australia. The continuous extra demand from international and domestic tourists is creating new jobs in great cities like Cairns (tropical wonderland), Dubbo (Western Plains Zoo), Orange and Armidale (foodie experiences), Bendigo and Ballarat (our gold rush heritage), and regional Tasmania (because, well, it is God’s country!). If Queensland can ever get its act together with a serious tourism campaign, the state with more tourist attractions than any other has the potential to set economic records. And, when the cash registers start ringing again, Queensland’s affordable housing and desirable lifestyle will drag interstate migration well above 20,000 per year. That’s one of the most sustainable growth drivers that any property market could wish for. April’s Commonwealth Games is just a short sugar fix; the state still lacks a long-term tourism strategic plan. While growth in jobs for regional Australia is well overdue, the 2017 data just supports the trends that Propertyology flagged a few years ago and has influenced our decision on a few locations across that our buyer’s agents are helping people invest in. Aside from Australian tourism, the millions of extra people entering the middle class each month during the Asian Century have an enormous attraction to our produce. This nation that was first built off the sheep’s back is now Asia’s food bowl. Universities have recently experienced an unprecedented increase in agriculture-related degrees. And new manufacturing jobs are being created by food processing businesses such as abattoirs, cheese factories, and wine making. Renewable energy is a fast-emerging sector that benefits regional economies more than capital cities. Household budget pressures and environmental pressures are the trigger for billions of dollars already being invested in job-creating wind, solar and battery projects across this vast country. 2017 was one of the strongest years for job growth in Australian history, with a 5.7 per cent increase in volumes for the year. And it wasn’t a year in isolation – total jobs in Australia for the last two calendar years have increased by 6.6 per cent. Closer analysis of ABS data shows that the industry sectors which produced the largest rates of employment growth in 2017 were health (104,317), construction (100,664), retail (60,064), education (40,991), accommodation and food (36,485), and agriculture (28,901). A 2017 net job loss occurred in manufacturing (85,060), admin and support (28,698), public admin and safety (27,433), and mining (4,688). One would assume that a significant portion of manufacturing job losses in 2017 related to Toyota and Holden plant closures (Adelaide and Melbourne) late last year. The health sector is Australia’s biggest direct employer (13.3 per cent of all jobs). The recent growth in the health sector is indicative of our aging population combined with the rollout of new positions under the NDIS program. Propertyology believes that Australia’s construction industry (the backbone of our economy) is now at an interesting cross road. Completion of the mining construction boom in 2012-13 resulted in large volumes of workers in this sector being redeployed to new residential […]

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2018 property market outlook

Simon Pressley — Mon, 15 Jan 2018 05:19:37 +0000

This time last year, Sydney and Melbourne were in the middle of a property market boom and every property market analyst in Australia was predicted that those same cities would again finish top-of-the- table in 2017. Everyone except Propertyology, that is – we were the one black sheep who made the bold prediction that Hobart would be Australia’s best-performed capital city for 2017 [refer here]. Similarly, we also said that several regional locations would perform well. Now that the jury is out, let’s review what did happen in 2017 and see what our crystal ball says for the year ahead. Who were the winners and losers in Australian property markets during 2017? Melbourne (12 per cent) and Sydney (10 per cent) produced their fifth consecutive year of strong growth. Canberra (7 per cent) was the surprise packet, while Adelaide was also steady. On the other hand, Perth and Darwin had their third year of declining prices. Brisbane (3 per cent) was again underwhelming. Australia’s third biggest city has only seen 35 per cent compound growth over the nine years since the onset of the GFC while Sydney, Melbourne and Hobart produced that in just two to three years. Australia’s most affordable capital city, Hobart, has been the clear stand out in 2017 with 14.3 per cent growth for the twelve months ending September 2017. Given that Hobart also has the best rental yields in the country, the total return (capital growth + yield) is 5 per cent more than Melbourne and 7 per cent more than Sydney. With three months of data yet to unfold to round out the 2017 calendar year, we believe Hobart will end 2017 with at least 16 per cent price growth. That will make it the largest annual increase by any capital city in ten years. What is driving the Hobart property market? As predicted by Propertyology when we began investing in Hobart in mid-2014, the Tasmanian economy has been the most improved in Australia by a long streak and, as usually happens, its property market followed suit. The Apple Isle has some of the best agricultural products and tourism experiences in the world; Hobart is also a beautiful university city. But it’s only recently that people outside of Tasmania have grown to appreciate this. Chinese President, Xi Jinping, made a special visit to Hobart (and only Hobart) in 2014 to foster business relationships and now the secret of Tasmania is well and truly out. The rate of employment growth in Hobart over the last year was four times the national average and double the next best capital city. The economy doesn’t appear to be slowing down either; job advertisements have a very steep trajectory. Records keep being broken in retail trade (the cash registers are ringing loud) and visitor volumes (domestic and international). The strong economy and high consumer confidence means that locals are keen to transact in property and there certainly aren’t any affordability barriers. How did regional Australia perform in 2017? Newcastle (12.7 per cent) and Wollongong (15.5 per cent) again benefitted from the Sydney knock-on effect. Lifestyle markets like Byron Bay (14.1 per cent) and Port Macquarie (9.3 per cent) also performed very well. Lesser-known New South Wales locations such as Maitland (6.2 per cent), Bathurst (6.5 per cent), Dubbo (5.3 per cent), and Orange (4.7 per cent) performed better than four out eight capital cities. The tomato capital of Australia, Guyra, had a stellar year with 16 per cent growth. In Victoria, Geelong (7.9 per cent) had another good year and Ballarat (4.2 per cent) was solid. Vindicating Propertyology’s belief from a couple of years ago that parts of regional Australia with specific agricultural products and locally-based food manufacturing businesses would do well, Colac was a stand out with 19.6 per cent price growth. The underrated rural township of Goondiwindi was Queensland’s star performer last year with 20 per cent price growth. Gold Coast (7.8 per cent), Sunshine Coast (5.7 per cent), and Beaudesert (5.5 per cent) again performed better than the state’s capital. While major regional service centres such as Townsville, Rockhampton, Gladstone and Mackay saw price declines, they all produced an increase in sale volumes and there are a number of positive things soon to impact their respective economies which will flow through to property prices. A 6 per cent increase in transaction volumes in the industrial township of Port Augusta forced the median house price up by 13.2 per cent over the last twelve months. In Western Australia, the lifestyle markets of Broome and Busselton were price growth neutral over the last year while the performance of Albany and Geraldton was in line with Greater-Perth’s, producing a mild decline and showing signs of stabilising. Port Hedland (-33 per cent) and Karratha (-22.6 per cent) had big falls. Launceston (-1.2 per cent), Burnie (2 per cent), and Devonport (2.9 per cent) were yet to show any property price growth resulting from Tasmania’s improved economy although sales volumes have increased and days-on-market are reducing. How will Sydney and Melbourne perform in 2018? 2017 was the fifth year of Sydney and Melbourne’s growth cycle and, even without APRA’s recent credit-tightening intervention, logic would suggest that the property markets of Australia’s two most expensive cities are due to moderate. While there are no immediate signs of Sydney’s economy slowing down, auction clearance rates and sale volumes suggest that Sydney’s property market had flattened right out by the end of 2017. Property prices appear to be well out of reach of most of the buying public and local sentiment has been dampened by suggestions from some economists that prices could fall by as much as 10 per cent. There are real risks with Sydney’s market however, all things being equal, Propertyology’s view is that Sydney property prices are likely to be largely flat for some years. Our analysis of building approval data is such that we see potential for unit prices to ease in some parts of Sydney. Melbourne ended 2017 […]

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Equally important objectives, but not a level playing field

Simon Pressley — Fri, 30 Jun 2017 04:57:44 +0000

The property investor and the owner-occupier: while their primary motivations for buying a property might be different, they both have legitimate and equally important reasons. Consider this scenario. Mary (an owner-occupier) and Jane (an investor) are both interested in buying a particular property worth $450,000. Mary is motivated by how the property satisfies her and her family’s important lifestyle needs at this stage of their lives. Just as important, Jane is motivated by the goal of being able to afford a particular lifestyle later in life which a (forever shrinking) taxpayer-funded pension will not provide. But, the costs to the property owner are quite different, depending on whether it’s Mary or Jane who becomes the eventual owner. For the purpose of this exercise, let’s assume this property is located somewhere in the state of Queensland. Mary will pay approximately $8,400 in stamp duty for the property while Jane will be slugged at extra $7,000 if she buys the property with the intention of providing shelter for third parties, as opposed to herself. All property owners would hopefully acknowledge the importance of neighbourhood parks, footpaths, roads, and services such as rubbish removal which are funded by council rates. But, even though they quite possibly don’t directly benefit from any of these services, many city councils charge a higher levy to an investor than an owner-occupier. Even though Mary and Jane may have borrowed the same amount of money to buy this hypothetical $450,000 property, in this financial climate, Jane will pay between $1,500 and $2,000 extra interest on her loan each year than Mary. Recent interventions by the Australian Prudential Regulation Authority have resulted in investment property loans incurring 0.6 per cent to 1 per cent higher interest rates. Fast forward (say ten years from now) and Mary or Jane decide they wish to sell the property. Mary’s personal circumstances may require her to move house whereas Jane’s equally important circumstances may necessitate her to sell to support her retirement. If Mary sold the property as an owner-occupier she would retain 100 per cent of the sale proceeds whereas Jane would be liable for capital gains tax (a figure that could be six-digits). This scenario provides important context for the segment of Australia’s population whom (quite strangely) seem to think that investors have advantages over owner occupiers. To the contrary, investors pay extra in more ways than one. So, no, it’s not a level playing field – investors well and truly pay full freight. At the end of the day, it shouldn’t be an US (owner-occupier) versus THEM (investor) thing. The personal motivations of Mary and Jane are both important and ought to be respected accordingly.

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Population records broken all over Australia

Simon Pressley — Wed, 01 Feb 2017 03:17:05 +0000

Western Australia creates a Grand Canyon while Victoria gives birth to Mackay While we were all tucking in to our Christmas ham, the latest series of population data was released by the Australian Bureau of Statistics (ABS) revealing a few new records broken by Victoria, Western Australia, South Australia, Northern Territory and New South Wales. Demand for housing remains incredibly high with Australia’s population growing by an average of 863 people per day during the quarter ending June 2016. The annual increase of 337,821 has been quite consistent over the last four years. 54 per cent of Australia’s population growth for the year came from overseas migration. Of the 78,600 total population increase for the quarter, an all-time record 47,247 came from natural increase (births minus deaths). The 86,700 births during the June quarter well and truly exceeds the previous record of 78,100 in the March 2012 quarter. The mixed fortunes at a state-by-state level are indicative of the recent performance of capital city property markets. Victoria’s population is breaking all sorts of record highs while, on the other hand, Western Australia appears to be falling in a hole deeper than the Grand Canyon; both South Australia and Northern Territory have set new interstate migration records for the wrong reasons. After more than a decade of nation-leading population growth, Western Australia’s 1.05 per cent growth for the year ending June 2016 is well below the national average of 1.42 per cent. Forty three consecutive quarters of positive growth of interstate migration during the boom years has been followed by nine straight quarters negative growth. The 2,805 people that migrated away from Western Australia in the June 2016 quarter is an all-time record and the 996 net increase in overseas migration during the quarter pales in to insignificance when compared to the 13,165 comparative figure from four years earlier. This concerning population trend in Western Australia is a dampener for housing demand at a time when Perth has been producing record volumes of new homes. It is absolutely no coincidence that Western Australia’s population shift follows the path of falling iron ore prices. As shown in this graphic, the parallel of these two metrics is incredible. Western Australia has a lot going for it, however its economy is the least diversified of all Australian states. It needs to (quickly) develop other sectors of its economy. Namely, tourism, agriculture, and the international student market. The biggest success story from population data continues to be Victoria. The 123,131 total population increase for the year to June 2016 surpassed the record previously held by Queensland (115,561 in 2008). 65,007 (53 per cent) was from overseas migration. Victoria’s total population growth last year is comparable in size to the total population of Australia’s nineteenth biggest city, Mackay. Victoria’s records don’t stop there. The 14,903 natural increase for the June quarter is a state record as is the 4,947 quarterly increase in interstate migration. It’s now been three consecutive quarters that interstate migration in Victoria has been more than 4,000 (last achieved way back in 1995). While we know that Victoria’s construction industry has had no problem building enough dwellings to cater for the demand, the biggest challenge will be whether the state can continue to create enough jobs. It may be a couple of years before we all know the full impact on Melbourne’s economy from car manufacturing closures. New South Wales’s population grew by 105,585 over the year to June 2016 and is on track for a fourth consecutive year of 100,000 plus increases – a feat never achieved before in Australian history. The state continues to be the main arrival point for internationals with the net increase in overseas migration for the year being 71,161. While the state’s economy remains incredibly strong, lack of housing affordability would be the primary cause for 11,349 people relocating interstate during the year ending June 2016. Queensland’s population growth rate of 1.35 per cent for the year ending June 2016 was just behind New South Wales. The 4,844,473 population spread across the sunshine state is comparable to the population crammed in to greater-Sydney. We may be seeing the beginning of a new trend with Queensland’s population. The 3,328 quarterly increase in interstate migration is its highest since December 2008. The June quarter marked three consecutive periods of interstate migration of more than 3,000. A rebound in coal prices will make it easier for job creation to attract more people across the border but, if Brisbane’s property market is to fully awaken from its slumber, funding initiatives for new infrastructure is what is really needed. South Australia’s population growth rate of 0.1 per cent for the June quarter was the lowest in Australia. Negative growth in interstate migration of 1,873 is the state’s worst performance in over twenty years. Things are really grinding to a halt in Northern Territory with a total increase in population over the year of a mere 534 people. It’s now been twenty seven consecutive quarters since the top end produced a positive interstate migration figure. Improved economic conditions are behind Tasmania’s sustained population rebound. The state has produced positive growth in interstate migration in four of the last five quarters (a stark difference to the previous sixteen consecutive quarters of negative growth). Canberra’s population growth rate of 1.29 per cent for the last year continues to closely follow the national trend. The June 2016 quarter produced the highest natural increase (births / deaths) dating back to the start of ABS in 1981.

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Population growth forecasts – Queensland

Simon Pressley — Fri, 23 Sep 2016 02:05:57 +0000

While it is most certainly not the only or most important factor, population growth forecasts are part of every well-considered property investment decision. With eleven strong regional cities each with a population of more than 50,000 people, this is particularly important in Queensland where more people live outside the state’s capital city than it. Throughout the noughties era, Queensland’s population growth was a national success story. Over the last few years, the sunshine state’s population growth has been much more subdued with 2015 growth rate of 1.2 per cent being significantly lower than the ten year average of 2 per cent. Propertyology believes that the recent slide is due to a combination of the coal industry downturn, fewer employment opportunities generally, and higher levels of state debt preventing economic stimulus. That said, we believe that there is good reason to be optimistic about Queensland’s future population growth. Tourism and agriculture are strong pillars of the economy which have a very promising outlook. Logic would also suggest that there’ll be an upturn for the mining industry at some stage in future years (the world will always need energy). Data from Queensland Treasury suggests that parts of South East Queensland, Gladstone, Townsville, and Cairns are forecast for the biggest population growth rates through to 2036. Queensland is the second most decentralised state in Australia (after Tasmania). Whereas other states have a majority of their population living within their respective capital cities, only 48 per cent of Queensland’s population reside in greater-Brisbane. Brisbane City Council is the largest local government area in Australia. Population is forecast to grow at an average annual rate of 1.1 per cent through to 2036, well below the state average forecast of 1.7 per cent. The state is forecasting greater-Brisbane to accommodate most of its growing population in Ipswich (4.2 per cent), Logan (2.2 per cent), and Moreton Bay (1.9 per cent). Gold Coast, Sunshine Coast, and Scenic Rim, all within the state’s south east corner, are forecast to grow at an average annual rate of 2.1 per cent. The state’s industrial powerhouse, Gladstone is expected to continue its long history of above-average population growth with 2.4 per cent average annual growth forecast. Gladstone has extremely valuable port and rail infrastructure and is the state’s epicentre for resources exporting and industrial manufacturing. While the property market in Gladstone has struggled recently due to an over-stimulated construction industry the raw fundamentals still include above average wages, strong population growth, and economic development. In the state’s north, Cairns (1.7 per cent) and Townsville (1.9 per cent) justifiably have population growth forecasts well above Brisbane’s 1.1 per cent out to 2036. Proximity to Asia, international airports, and deep sea port infrastructure will ensure that both cities play a huge role in helping Australia to capitalise in the Asian Century. Population growth is one of many factors which influence property markets. For a variety of reasons, Queensland markets which Propertyology maintains a keen interest include Rockhampton, Cairns, Townsville, Gladstone, Bundaberg, Toowoomba, and Scenic Rim.

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Here’s how to create a hotspot

Simon Pressley — Tue, 28 Jun 2016 05:17:44 +0000

The more property-related material one consumes the more times one will hear the term ‘hotspot’. At any point in time, if we were to take stock of every location around the country that every so-called ‘expert’ was declaring a hotspot we’d be well within our rights to be expecting that property markets across the entire country experienced a never-ending property boom that was bigger than the world had ever seen. What is a hotspot, anyway? If one was just about to purchase an investment property would it be wise to buy in a hotspot? Isn’t it more important what a market does over the coming several years than what it’s doing right now or might do next year? And, who among this ever-growing list of ‘experts’ actually has the credentials to warrant respect on property market outlooks? Property is a topic that attracts so much interest that every second person lays claims to being an ‘expert’ and it seems that human beings don’t take much convincing. It’s amazing how many people have placed so much value on the opinion of that friend or family member who we trust and respect because this person has been successful in their career (even though that career doesn’t involve studying property markets). Similarly, investors hang their hat on a good location to invest in property because it was suggested by a person in an occupation with ‘status’ – such as that well-meaning accountant, mortgage broker, solicitor, financial planner, or even the local doctor. I find that insane but it happens a lot. Then, of course, there’s the ‘experts’ who do actually have a full-time role involving property – some even have a really big profile – but the nature of how they earn their own income is such that their catch-cry is intentionally angled towards to promoting a particular location or a particular property. The property world is littered with vested interests and very few consumers would be able to detect who these people are. Here’s some statistics which will hopefully make one question whether or not it is probable that the property world does have so many experts. According to the Australian Taxation Office (ATO), there are 12.7 million taxpayers of which 1.94 million people (8 per cent of Australians) declare an income from a property (aka ‘property investors’). But, surely the definition of ‘investment property expert’ includes, although is not limited to, having a portfolio of several properties yourself? According to the ATO, only 0.9 per cent of taxpayers own six or more properties. I’ve done the math on that for you. A mere 0.5 per cent of Australia’s 24 million population own six or more investment properties. Now about those hotspots. If a market genuinely is ‘hot’, it’s almost definitely not the location with the best potential over the medium term anyway. Think about it: One decides to act on a claim of a hotspot so they get finance sorted, figure out exactly which pocket within that location is best to focus on, spend several weeks finding that ‘right property’, miss out on several, and then eventually do buy something, but at top dollar because the competition is so fierce. Most of the price growth in this cycle of that market is probably well behind us. The best potential for growth is in a market that is probably flat or showing mild growth – it won’t be hot. As the world’s most famous investor, the great Warren Buffett, says: ‘The time to be fearful is when everyone else is greedy and the time to be greedy is when others are fearful.’ Most claims of hotspots end up being bland-spots. Genuine ‘booms’ only come around once in a while. But, that won’t stop people constantly spruiking about the next hotspot. With human beings behaving as they do, let me show you how easy it is for someone to create the next ‘hotspot’ which, before too long, lots of people will invest in: First, a property data company makes an innocent observation of a possible new trend evolving and mentions this on their website, newsletter, and press release Some journalists, who are often drawn to the attention of these high profile data companies, pounce on the opportunity to use this information to help fill their weekly quota of so-called news stories. For a greater impact from the story they throw in some dramatic terms like ‘heating up’ and ‘ready to take off’. Millions of people end up reading these articles A handful of people who own or work within a property investment business of sorts start seeing this location pop up in their news feed. They fumble around and come up with a few generic stats like population growth rates, make mention of some features and benefits like ‘public transport’ and ‘infrastructure’ and, suddenly, they’ve produced a hotspot report of their own on this location. If they have a vested interest in ‘promoting’ property in this location, it’s amazing just how jazzed up that report can look once it comes back from their marketing department Before long, we have got consensus. Everyone (somehow) is reporting the same thing. Even though no bugger has done an ounce of proper research. The sheep fall in line, like well-behaved lambs all beating to the same drum Thousands of people who happen to be interested in investing in property around this time so they have a heightened interest in property-related material. They are super keen to quench their thirst for information to help decide exactly where they should be investing These same people do something other than study property markets for a living and they rarely seek out the opinion of one those genuine experts. Unfortunately, they don’t realise that ‘reading’ isn’t necessarily ‘research’; often it’s just ‘reading’. This same location keeps popping up so they decide that it must be true Mission accomplished. We have a hotspot If you don’t believe me about this stuff, just think back to the […]

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Hobart to become Australia’s best performing city

Simon Pressley — Wed, 25 May 2016 05:40:09 +0000

If we draw a line in the sand right now and cast our minds forward three years, of Australia’s eight capital city property markets my money is on Hobart being Australia’s best performer. While other so-called experts were berating Tasmania’s basket-case economy, Propertyology gave Hobart our official green-light back in April 2014. The first property which we purchased was for my own portfolio and, over the following two years, we’ve purchased fifty odd properties for our clients. Hobart and Tasmania in general had its share of economic challenges over recent years. The forestry industry completely closed in 2010, the were some mining-related job losses in the state’s north west, and a large percentage of students were dropping out of school after year ten. For several years much was written about Tasmania’s high unemployment rate and below average population growth rate. Property investors, myself included, for quite a while simply put Hobart in the ‘don’t bother’ basket. 58 per cent of the state’s population actually live outside of the state’s capital city so it’s often not appropriate to paint Hobart with the broader Tasmanian brush. Hobart’s unemployment rates are often much better than the state average. Two years on from April 2014 when Propertyology started investing in Hobart, Australia’s average unemployment rate had improved by 0.2 per cent (5.9 per cent to 5.7 per cent) while Hobart’s had improved by 0.9 per cent (7.0 per cent to 6.1 per cent). The reason Propertyology chose to focus our research energy on Hobart in the first place was because we believed that it had a mix of economic drivers with significant potential for prosperity at this juncture in the Asian Century. The OECD has forecast that an estimated 2.5 billion extra Asian people will transition from poverty to the middle class between 2013 and 2030. That places enormous demand on many of the goods and services which Australians have always taken for granted. Education, food manufacturing and tourism are of premium quality in Hobart. International tourism numbers have reached record levels for three consecutive years now, growing by 20 per cent to the year ending March 2016 compared to 8 per cent national growth. Plantation forestry has re-emerged and is creating new jobs in manufacturing and transport. Growth in retail trade figures has occurred for sixteen consecutive months. The ABS released a statement earlier this year saying that Tasmania’s economy is now growing at its fastest pace since 2010 and only NSW and Victoria were growing at a stronger rate. The improvement in Tasmania’s economy coincided with the end of a sixteen year reign of the former state government in March 2014. During 2014 and 2015, 9,000 extra jobs were created and interstate migration numbers have rebounded incredibly well. The correlation illustrated in this graph is fascinating. Of course, this directly increases demand for housing. And, unlike a majority of mainland capital cities, Hobart’s housing supply pipeline has been kept under control. In our opinion, Hobart is currently the most improved property market in Australia by a long shot. Propertyology forecasts that Hobart will be Australia’s best performed market over the next few years. The good times are only just beginning for Tassie. There’s a $600 million major upgrade of the Royal Hobart hospital currently under construction, development approval has recently been granted for seven (7) new hotels, and the state government has put the iconic Macquarie Point site out to tender for a Darling Harbour style precinct. Vacancy rates in Hobart are currently the lowest of all capital cities and all of clients are enjoying rental yields of 5 per cent to 5.5 per cent. Importantly, rates of new supply have been well controlled and the building approval pipeline indicates that this will continue for the foreseeable future.

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Focus on the fundamentals, not the name

Simon Pressley — Fri, 18 Mar 2016 06:13:23 +0000

How does the following scenario sound as an opportunity to invest in property with excellent investment fundamentals? Picture purchasing a detached house for $400,000 (well under the national average price of $475,000) achieving a rental yield of 6 per cent per annum. Also imagine that the property is in a location where population growth is in line with the national average, household income is well above the national average, and the average age of occupants is below the national average. Can you think of many locations with better credentials? For the fifteen year period ending December 2014, the average annual change in median house values in this location was 6.5 per cent and, when combined with median yields of 6.4 per cent, the total return gives this location a ranking which puts it amongst Australia’s Top 40 per cent (209th out of 550 local government jurisdictions). In fact, the historical performance of this property market since the year 2000 was on par with Sunshine Coast and Ballarat, better than the highly desirable South Perth, equal to or better than twenty-nine of Melbourne’s thirty-one LGAs, and better than all of Sydney’s forty-three LGAs. Keen to know where this location is? The main industries supporting the economy of this location are tourism, agriculture, and the defence force. The outlook for these economies at this juncture in the Asian Century, where an unprecedented rise in the number of people about to enter the middle class beckons, is super exciting. It’s little wonder that the Australian Federal Government and lots of wealthy foreign investors are actively pursuing funding options for new infrastructure investment in the region. With current rents all but covering the holding costs on an investment property in this location, just imagine the potential for future capital growth. If this hasn’t got the motivated property investor licking their lips I don’t know what will! World champion athletes Cadel Evans and Leisel Jones were born in this location is probably insufficient information for people to correctly guess the name of this location. Ok, I’ll cease with the suspense. The location that I have described is the Northern Territory regional town of Katherine. Now, I bet your investment appetite has suddenly dissipated. I have just created a real-life set of circumstances to illustrate that too few property investors have an ability to understand and remain focused on the important fundamentals that count most when selecting a location to invest in. The fundamentals described above are real; they are impressive. And if, when I revealed the name of this location, it was a suburb within a capital city I suspect this report would be promptly shared with so many family and friends that it would accelerate within Google’s search engine faster than one could say ‘hotspot’. Instead of making decisions on investment fundamentals, almost all property investors will immediately be drawn to a map and their personal feelings upon receipt of the name of a location. Often without even realising it, the heart immediately over-rules the head and we begin to ask ourselves questions like ‘would we live there?’ Whether we personally would live in Katherine, Kingston or Kogarah is as subjective as selecting T-bone, trout, or tofu from the restaurant menu. Located 320 kilometres (a three hour drive) south east of Darwin, Katherine is positioned along the nationally significant freight link connecting Darwin to Adelaide. In addition to the national highway, a railway line connects also runs past Katherine. Katherine is the Northern Territory’s fifth most populous local government authority (after Darwin, Palmerston, Alice Springs, and Litchfield). Katherine has developed in to the primary service centre for a total regional population of 24,000 and an area almost the size of Victoria. Essential social infrastructure is well established, including modern retail facilities, hospital, schooling, sports grounds, parks and gardens as well as several Commonwealth and Territory Government services. The main industries supporting Katherine’s economy are agriculture, tourism, defence, government (primary industries), and mining. RAAF Base Tindal, located adjacent to Katherine civilian airport, is significant for Australia’s air combat defence and fast jet base. The RAAF personnel and families contribute approximately 2,200 people to Katherine’s population and this is expected to increase with the potential of the Delamere Bombing Range and the Bradshaw Range. The region is adventure territory, offering unique attractions such as Kakadu and Nitmiluk national parks, Katherine Gorge, ancient (indigenous) rock paintings, caves, fishing and camping experiences. Katherine is exceptionally popular for the ‘grey nomads’ (the fast growing number of baby boomers who enjoy long and affordable holidays while taking in the unique sights that Australia offers). With approximately 300,000 visitors per year, the retail facilities of Katherine are more than adequate. Plentiful water supply and vast open planes makes this prime agricultural land. The environment consists of a warm, tropical climate, spectacular gorges and rainforests, and heavy monsoonal rains in summer. Flash flooding from the Katherine River can occur although it is quite sheltered from the potentially destructive cyclonic winds.

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