PROPERTY MARKET TRENDS FOR 2017
Successful property investor and founder of Binvested Buyers Agency, Nathan Birch highlights some property market trends for 2017 and shares tips for the year ahead.
The Perth market is still feeling the ill effects of the mining boom blow-out, with too much supply and a falling population bringing down prices. Sellers are finding it hard to offload properties, and some investors might view this as an opportunity to strike at the bottom of the market. However, we would advise against buying here right now as vacancies, valuations, resale values and the ability to raise rents are very uncertain. None of which help future portfolio growth in this current finance environment.
Nathan predicts prices to continue falling over the course of 2017 with the possibility of a minor bounce back in three to four years’ time alongside potentially greater demand for commodities.
This reliance on the performance of commodities and demand for mining is the very reason Nathan advises against investing in the Perth market.
BIS Shrapnel predicts between 0 to -5% growth for Perth in 2017, while CoreLogic puts growth even lower at -7%.
Like Perth, Darwin and the NT markets rested heavily on industry that has now dwindled away. As residents migrate to other regions for employment, demand for property has continued to drop.
Nathan predicts this market to remain flat at best, if not negative. He advises against buying in the NT during 2017.
According to SQM Research, growth in Darwin is set to decline. The agency predicts growth for 2017 to be between -9 and -5%, or -5 to -3%.
The Adelaide market remains cheap, with relatively high yield and small pockets of growth. However, there are no significant infrastructure projects on the horizon to suggest population growth or greater prospects for employment. This means demand for housing is not set to expand.
Meanwhile, there is lots of new property development happening and land for housing is plentiful. If demand does start to pick up, prices are not likely to be boosted as there won’t be any under-supply present.
Adelaide also currently has one of the highest unemployment rates in Australia, reducing the likelihood of good economic growth in the near future.
Nathan says, while “Adelaide is still very much under the radar,” he doesn’t see potential for significant growth there over the coming year.
“I don’t think it’s going to be a stand-out performer.”
BIS Shrapnel predicts the Adelaide market to stay flat over 2017.
Despite having delivered excellent growth for 2016, its position as a niche market means long-term consistency is less than certain. As more of a lifestyle market, there aren’t any big infrastructure or development projects on the horizon that would bolster longevity in growth.
Nathan advises steering clear of the Hobart market.
“For those low entry prices, I’d rather be buying in capital cities in blue-collar areas – be it Sydney or Queensland.”
Thanks to its recent construction boom, Melbourne is now said to have an oversupply of apartments in its CBD and inner city area – with yet more completions on the horizon.
Although blue-chip areas of Melbourne and Sydney have tracked similarly during the boom, there are key differences between that will affect future growth. Melbourne simply doesn’t have the same degree of infrastructure planned for the growth belts to encourage growth in bread and butter suburbs.
Despite claims that price growth is catching up to Sydney, BIS Shrapnel has predicted apartment prices could fall by up to 3.5% in 2017.
HSBC Chief Economist, Paul Bloxham, says “We expect housing price growth of 2% to 4%, supported by growth in detached house prices (5% to 6%) as solid demand is met by only limited supply.”
“In contrast, we expect the oversupply in the apartment market, particularly in the inner city, is likely to start showing through in price falls (-6% to -2%).”
Nathan advises against investing in Melbourne, and says he has no intention of doing so himself. “I think it’s too risky,” he says.
Despite many areas in Sydney seemingly having reached a pinnacle, there are still many bread and butter areas that should boast good growth over 2017, says Nathan.
“Last year, we saw double digit growth in the markets we source properties in. I expect to see the same thing this year,” he says.
Sydney is undergoing many improvements to transport infrastructure and town planning in an attempt to connect the Western growth belts with close employment. The Greater Sydney 2056 Vision plans to create 817,000 jobs and 792,000 homes within the next 20 years.
The population is ever growing and despite a deceptively ample supply of housing approvals, the completion rate of new developments is only at 53%, according to the Urban Taskforce.
“Sydney has had a lot of [new residential] building happen recently, but it is playing catch up. From 2004 to 2012, there wasn’t much building happening and that’s where the pent up demand is.” Nathan says.
This adds weight to the claims of many analysts who believe Sydney is safe from an oversupply of apartments in 2017.
CoreLogic predicts Sydney will experience growth of approximately 10% in 2017, while SQM maintains growth of between 11 and 16% is possible if the cash rate remains unchanged.
For those who invest with the right strategies in the Sydney market, there are still a lot of gains to be made.
“Sydney is the New York of Australia,” Nathan says.
“I think we’ll continue to see a lot of growth there, especially in the western growth belt.”
BRISBANE AND GOLD COAST
The Brisbane to Tweed Heads region of Queensland has been a good growth area throughout 2016. Nathan expects 2017 to be a stand-out year, with excellent growth predicted for much of Brisbane and the Gold Coast.
With stock now limited and rarely on the market for long, conditions are similar to the Sydney market in 2012 and 2013, before the boom, says Nathan.
“The opportunity is there to make some money for those who are bold enough to take action, and who have a devised plan in place,” he says.
While he cautions against buying apartments in Brisbane’s CBD due to a possible oversupply problem, Nathan says greater Brisbane and the Gold Coast are experiencing a surge in population growth due to lifestyle, infrastructure and affordability considerations. The region has the highest proportion of year on year population growth of all major cities.
Data from CoreLogic has revealed year on year price growth in the Gold Coast region since 2013, which Nathan expects to continue throughout 2017.
REGIONAL AND FAR NORTH QUEENSLAND
A lot of regional towns that were doing well during the mining boom are now faring similarly to properties in Perth and Darwin. Prices and demand have both dropped, leaving those who invested there during the boom scratching their head (or pulling out their hair).
Some areas in Far North Queensland are seeing a resurgence in tourism thanks to the low Australian dollar. This could see a rise in employment and possibly a beneficial effect on property prices.
However, having personally experimented with regional investments in the past, Nathan feels they don’t have the same long term potential as metro properties. He wouldn’t be looking to invest here in 2017, especially not as a first-time investment.
There are still opportunities in metropolitan markets like Brisbane to pick up entry level properties with a good cash flow and upside for growth.
TIPS FOR INVESTING IN 2017.
In short Sydney, Brisbane and the Gold Coast will continue to be star performers in 2017, with good growth expected in certain areas. Meanwhile, Melbourne, Perth and Darwin remain off the radar.
Once again, the restrictive investment finance environment will continue to strain progress for some investors. It’s more important than ever to play your cards right or risk getting sidelined.
1. Understand exactly what your short and long term goals are
2. Educate yourself on the current finance environment
3. Discover whether you need a cash flow, capital growth or balanced property?
5. Evaluate whether the property you are considering will help you buy the next one
6. Giddy up and take action! The best time to invest was yesterday, the next best is today.
What are your tips and picks for 2017? Do you see any challenges ahead?
If you are interested in putting together an action plan for investing in 2017, get in touch with the Binvested property investment team today.