2016 AUSTRALIAN PROPERTY OUTLOOK
2015 was a golden year for established investors in cities like Melbourne and Sydney, where prices grew between 10 and 20 per cent respectively (Australian Bureau of Statistics). While some investors were elated to be cashing in on the boom, there was an equal amount of despair from those wanting to get a foothold in the market. Are we to expect more of the same? Nathan Birch shares his property outlook for 2016. With investments in most Australian markets, Nathan provides a unique perspective on the investment market.
WILL THE SYDNEY AND MELBOURNE PROPERTY MARKETS KEEP GROWING?
Having 200 properties to his name across Australia, Nathan was one of those who benefited from the recent boom and is now sitting pretty on a $50 million property portfolio. So does he expect these markets to keep growing? Nathan says, ‘there are still micro-environments within these cities where good growth will continue such as in outlying blue collar suburbs. On the whole I expect that we will see softer growth as these markets reach the end of this growth cycle, you can clearly see that prices are outstripping household serviceability in areas where properties are ticking over the $1 million mark, so I expect these areas to stay flat for a while’.
In terms of the rental market Nathan believes ‘There is a lot of new high density and outer ring development happening in Melbourne which is holding back rental yields. Rental competition is not as hot as in Sydney where we are seeing a shortage of rental accommodation. I expect that rental prices will start going up in Sydney this year’.
WHERE TO LOOK FOR INVESTMENT PROPERTIES?
With the Sydney and Melbourne markets hitting the peak of their cycle Nathan warns against panic buying at the top of this cycle, ‘unless you can find an entry level blue collar property property priced below market value with positive cash flow’.
For investors looking for the next boom Nathan suggests looking to metro Brisbane and the Gold Coast, ‘These areas took stagnated with the GFC and haven’t quite recovered but we are seeing early signs of the tide turning. You can still buy properties cheaper than you could pre-GFC, sometimes even cheaper than the cost of building them today. Good rental yields are also making for positive cash flow investments’. As with Melbourne Nathan warns, ‘there is an oversupply of inner city apartments so I would avoid these’. It is important to remember that there are micro-economies in each of these markets so thorough research and evaluation is needed before pulling the trigger. If this doesn’t sound like your thing then ask the Binvested team about how Nathan can personally find the ideal investment property for you.
WHAT ABOUT PROPERTY IN PERTH, ADELAIDE, DARWIN AND HOBART?
For the time being Nathan doesn’t expect any significant growth in Perth or Darwin. ‘These cities are driven by the resource sector, with that in a downturn there is nothing to drive growth here’. Looking to Hobart and Adelaide Nathan says ‘these cities don’t have the fundamental economic and demographic drivers in place for any real growth right now. They will largely be steady in 2016’.
STAY AWAY FROM REGIONAL AND MINING TOWNS
The race of the regional and mining towns has well and truly ended and prices will continue to fall or level out. ‘These areas are always risky and not great for the foundation of a portfolio, ideally you want to buy them early on and sell them before the market retreats, and not hold onto them’. Similarly, regional areas are not expected to show a lot of promise this year, ‘I haven’t seen any regional areas with significant industry of infrastructure in the pipeline to encourage growth. There will always be some spots that outperform and surprise you, but without a crystal ball you can’t pick them ahead. My opinion is that buying within a 1-hour commute of a major city centre is the most reliable predictor of growth and stability’.
Want some more clarity on where you should be investing in 2016? Why not sign up for a Binvested MAP session?