G’day, my name’s Ben Everingham and today we’re going to talk about the 2017 Australian property market outlook.
Hey there, my name’s Ben Everingham and I’m the director here at Pumped On Property and today I’m gonna talk about the 2017 Australian property market outlook. Now, I don’t pretend to be some sort of analyst or magician that can read the future, or see into the future. But today I’m gonna pull some of the data from some of the people that specialise in this stuff, and their businesses are based around not predicting the future, but analysing the current market and making statements or thoughts about the future. So, some of the data sources that I’m gonna talk about today are companies like Herron Todd White, Residex or RP Data. I talk about BIS, I might talk about some of the major banks, but in reality it’s definitely not my opinion or my thoughts- it’s just some of the things from some of the sources that I’ve been reading.
Now what I want to start by saying in this video that absolutely nobody has a crystal ball, and anybody that tells you that a market is going to do this, has the potential to get it wrong, because nobody can see into the future, and there’s all sorts of things on a global and a local and a national level that affect property prices in Australia. So, a really good example of this was an article I recently read in the Australian Financial Review, which basically named and shamed all of the property brokers in Australia and all of the companies that specialise in analysing the Australian property market and their predictions in 2015 and for 2016. And 99% of those guys got it completely wrong. They said that Sydney and Melbourne markets would go backwards, when in fact both of those markets, depending on the suburb, got very high single digit growth- or even in some cases, double digit growth. So, take everything that I say today, and I say always, with a grain of salt. I’m not a financial advisor, this is definitely not advice, but here’s some thoughts on the Australian market for 2017, and where we could end up by the end of the year, according to some of these great data providers.
So, let’s start with the Sydney market, because obviously it’s Australia’s biggest market. It’s where I grew up. I love the market. Obviously people that have bought there in the last four or five years have done very, very well. So according to data from RP data or CoreLogic last year, Sydney did very, very strong double digit growth. That was unexpected for a lot of people, who thought that it was at the top of the market. Whether your thoughts are, it is or it isn’t at the top of the market, we’re in a boom or we’re in a bust, it’s really irrelevant, because there were people that were in that market last year that made a huge amount of money.
So CoreLogic recently came out and reset their predictions for the Sydney market for 2017. They’re predicting double digit growth, which is huge again. It’s not going to be in every suburb, and that’s not what they’re saying at all, but the right suburbs and the right product type around the right infrastructure projects, with the right supply and demand factors. You know, 10% growth looks extremely strong. So part of the growth in Sydney has to do with this “under supply” of available property to buy/rent. I’m not going to go into all of the empty properties that are currently sitting in Sydney at the moment, and the fact that current vacancy rates don’t actually take those into account. That’s a lot of the product that was sold to international investors who just keep it sitting vacant, or people that own properties outright that don’t need to rent them out.
But according to the greater Sydney vision for 2056, we are talking about another 700 plus thousand homes to be built from now until then. And we’re talking about creating another 800 plus thousand jobs, so that’s super exciting in terms of the indicators that I like- which is infrastructure growth, population growth, housing growth. So, the long term vision for Sydney looks probably pretty promising in the sense that it’s still the capital of Australia, it’s still where the highest incomes in Australia are earned, and it does look like a positive market for 2017. Although, they got it wrong last year, so let’s see what happens.
The second market I wanted to talk about is all the way on the other side of Australia, and that’s the Perth market. It’s still massively feeling the effects of the mining boom, and according to the Herron Todd White report for December 2016, it’s still not at the bottom, which is 6 o’clock or the bottom of the property market. It’s definitely on its way down still. I don’t think there’s anyone in Australia that still doesn’t believe that Perth has further to go.
I was reading a really interesting email from John from Knowledge Source a couple of days ago, and he was suggesting that it might be an interesting time for certain people to go over there and get interesting properties with really interesting terms. So it might be a good opportunity for vendor finance deals, or putting an option on a property for the next couple of years, according to John. There’s still a bleed to occur in Perth, because it was so artificially inflated by the last commodities and mining boom. CoreLogic and BIS believe it’s going to reduce again in value this year by at least 5 to 7%. But again, no one’s got a crystal ball, and unfortunately both of those companies did get certain things wrong last year as well. So who knows what’s going to happen there?
There is also a huge amount of vacant property sitting there, so the vacancy rates in some of the areas are anywhere between 4 and 10%, which means it could be hard to get a tenant. Your property may sit vacant for a while in the current market. And it also might mean that you have to reduce your expectations around cash flow. But that’s kind of the Perth market in a nutshell.
If we jump to the bottom of Australia now and we look at the Adelaide market. This is a market that I would never personally invest in. I really like Sydney, I really like Melbourne and I really like Brisbane in terms of long term high quality markets with good projected population growth, solid infrastructure projects, plenty of activity and good incomes. But when I look at South Australia, I just see a major regional market place that may or may not end up actually becoming a major hub for Australian business, commerce infrastructure, and population growth. But again – who knows? So, Adelaide had a solid year last year in terms of some of the positives about that market. You can find properties with solid yields. There was quite a bit of, from my perspective, speculation on the Adelaide market last year, and I’d love to know- and I’m not a data provider, but how much of Adelaide’s “growth” last year was based on speculation from interstate investors versus the market actually requiring that growth. But again, according to BIS, it’s probably going to be a pretty flat year in 2017. But again, who knows for the Adelaide market?
There was a lot of talk last year about Hobart. Again, I think this is one of those lifestyle markets that may or may not end up doing anything. The capital growth last year was great, and a lot of people jumped into that market. Obviously the cash flow looks great. Entry price is pretty cheap. But, is it going to be the sort of market that can do between 4 and 6 or 7% capital growth year on year for the next ten years? Which is really what a sophisticated investor should be looking at- is anybody’s guess.
One of my favourite market places obviously, I’ve got a soft spot for this one at the moment. Personally I’ve been putting quite a bit of my own money into it, is South East Queensland, particularly Sunshine Coast, Brisbane, and Gold Coast markets. So Brisbane had a really, really solid year last year: not if you look at the market average which is 3.9 per cent, but if you look at specific suburbs. Some suburbs did very, very, very well, like double digit growth. Most of those suburbs were either close to the beaches or very close to the CBD, within sort of 7-12 kilometres. But according to John from Knowledge Source, he’s predicting very, very decent single digit growth. SEQ as a region is probably positioned as well as any of the others to actually achieve some growth this year, just because it still may be slightly undervalued from a dollar value perspective. When you look at the value for money, you can get close to the CBD or right on the beach at the moment, in comparison to Sydney and Melbourne.
I don’t pretend that Brissy is one of those markets that is anywhere close to Sydney and Melbourne right now in terms of population growth, infrastructure growth or incomes. But according to the State Government, it looks like the population is predicted to go from 1.9 million people, which it is right now, all the way up to 3 million people in the next 15 years. That’s Brisbane alone. If you look at the Sunshine Coast, you’ve got over 10 billion dollars worth of projects coming on over the next 15 years. Then you look at the Gold Coast at the moment, and the council’s just pouring amazing money into fixing it up. And then there’s obviously the speculation around the Commonwealth Games, the new Southport CBD. So again, it looks like an interesting opportunity. BIS believes that it’s probably gonna be one of the top performing markets in Australia in 2017 and 2018.
There’s so many different opinions on what’s happening in these marketplaces and you’ve really got to compare apples versus apples before you jump in and do anything.
The last one I want to talk about is Melbourne – so we’ve kind of jumped all around. But the Melbourne market’s obviously had a huge construction boom in recent times, and that’s resulted in what may be an oversupply of units in the CBD. I don’t think it’s a surprise to anyone that that’s a longer term prediction there. So there’s not as many infrastructure projects planned for the Melbourne market as there is in Sydney – which is why certain people in the market believe that Sydney’s going to out-perform Melbourne again this year. According to HSBC Bank, they’re predicting anywhere between 2 and 4% growth across that market, with between 5 and 7% growth in detached or single dwelling housing. So housing continues to seem to be the top performer in these markets year on year through this current cycle. There was huge, huge growth in 2015 and 2016, and it definitely performed a lot better than a lot of people thought. Again John from Knowledge Source is kind of saying that he sees really solid single digit growth, possibly even double digit growth.
So again, it’s anybody’s guess what’s going to happen in any of these markets, and once you’ve identified the market that you’re going to focus on this year- being Brisbane, Sydney, Melbourne, Perth, Adelaide, Hobart, Darwin, Canberra- it’s really about realising that not all markets are created equal. Different markets are going to perform better over the short term and long term, and it’s also realising that certain suburbs are going to perform better.
So if I look at some of the suburbs that we bought in for our clients last year in Brisbane for example, some of those suburbs did between 7 and 10% capital growth, where neighbouring suburbs to those did 0 to 2% growth. So even in a market where all of the boats are being lifted at the same time, it’s still about identifying the right suburb, the right property type, and the right strategy moving forward.
So I’ll finish off today’s video saying that I believe that infrastructure, population growth, job growth, the right indicators within each of the suburbs, the right opportunity within that suburb in terms of the right property type and the right time of the bigger picture cycle is extremely important to consider. For any of you that are still questioning where to buy this year, I’d love the opportunity to sit down with you for a one-on-one strategy session, where we’ll look at exactly where you are right now and exactly where you want to be in the future. And then we’ll help you bridge that gap between where you are and where you need to be by identifying your next step, getting you educated on the market place at a higher level and then really reducing it down to- I’m going to target these suburbs with this type of strategy. It’s a completely complementary strategy session.
You can book a time right into my calendar from there, and I’d love the opportunity to continue this conversation with you.
But 2017 looks positive. I’ve personally just bought a couple of properties- or built one, bought one – I’m renovating some stuff this year, I’m adding some granny flats to some stuff this year. I’m very, very excited about where things are heading globally with commodity prices increasing again, with things stabilising, with America starting to spend big, big, big money on domestic projects to get people back into the workforce.
So let’s see what happens, it’s anybody’s guess.
Until next time, stay hungry!