ARE WE CONFIDENT IN THE CURRENT AUSTRALIAN PROPERTY MARKET
Many people are short sighted when it comes to capital growth in the Australian property market, says Nathan. These people, he says, tend to see the recent property boom in Sydney as a warning sign that investors should avoid the market. On the contrary, Nathan is still positive about the growth of property in Sydney and Australia as a whole.
SYDNEY IS STILL SHORT OF HOUSES
Nathan recalls doing a seminar in 2010, in which he quoted a housing shortage of around 180,000 dwellings in Sydney at the time.
Six years later, in 2016, he quoted an updated statistic during a Binvested webinar. Sydney was then 330,000 dwellings short. By 2030, the harbour city was expected to be in need of an additional 650,000 dwellings to match demand.
REMEMBER THE PERIOD BEFORE SYDNEY BOOMED
Nathan purchased his first property in Sydney in 2003. It was at the peak of the market, before its collapse in 2003 to 2004.
In Mount Druitt, properties were selling for around $300,000 in 2003. In 2008, just before the GFC, Nathan was picking up comparable properties for anywhere between $150,000 and $200,000. Over those five years, there had been a price drop of around 50 per cent.
Between 2008 to 2012, the market caught up. Properties went back up to 2003 prices.
After 2012, the market surged. In the four years to 2016, property prices roughly doubled across Sydney.
WHAT WAS HAPPENING BEHIND THE SCENES?
Throughout this market cycle, Australia was going through a period of population growth.
Between 2003 and 2008, developers weren’t doing much to add to the stock of housing. There wasn’t much incentive to build at the time – profits were low if anything.
After the GFC, in the period between 2009 to 2012, it was very difficult to get construction loans – another contributing factor to the ever widening gap between supply and demand.
As the population grew, supply stayed almost the same. Pent up demand led to speculator price growth.
THE DEMAND IS STILL GREAT IN SYDNEY
Despite the appearance of countless cranes across the Sydney skyline, the city is still short of housing. There has been a ten to 12-year deficit of housing that is proving much bigger than what a few years of construction can remedy.
THE QUEENSLAND MARKET
The Queensland market hasn’t recovered since the GFC. This means it is very much below market value and very affordable to get into. Nathan foresees a lot of growth in this market as those locked out of Sydney prices look elsewhere.
Nathan believes the supply and demand equation in Melbourne doesn’t add up to good growth. At the moment, it appears there have been too many dwellings built with not enough population growth to sustain price growth.
PERTH AND DARWIN
Steering clear of mining-based areas has proved to be a good strategy, says Nathan. After the collapse of the mining boom, properties in these markets went down markedly. As of late 2016, they were still in a state of decline. Nathan says, he has seen a lot of people lose money by buying into speculative markets such as these.
THERE IS STILL GROWTH TO BE HAD IN AUSTRALIA
Nathan says, he is still positive about the growth of property in Australia. Successful investing depends on the market in which you buy, the type of properties you are buying and the way you go about it.
How did you fare during the Sydney market cycle of 2008 to 2016? Please share your experiences in the comments section below.