This time around isn’t that much different from the last time & the times before that. There is always talk about “how it will be different” this time around. But history shows that there is a set of certain variables which, when combined in the right way (like ingredients in a recipe), drive the property cycle. The residential market is set to improve; & in some locations & for certain product types, quite substantially.
Five market phases
There are five phases of the property cycle – trough, upswing, peak, downturn & recovery.
Since 1880 – the date when housing statistics started to be recorded – there have been ten cycles in Australia. They have averaged eight years in length from trough to trough or peak to peak. There have usually been five years of improving market conditions – historically end values rose 11% per annum. There are also periods of decline, averaging three years in duration, where values – in the past – have fallen, on average, by 5% for each of the three downturn years. Overall, Australian residential property owners have – again in the past – enjoyed annual capital gains of 8.5% per annum when property is held for a whole cycle.
Many residential markets across Australia are in the recovery phase of the property cycle.
Four capitals are in the recovery position including Brisbane, Sydney, Perth & Darwin. Several Queensland regions have also entered a recovery phase being Bundaberg; Toowoomba; Rockhampton; Mackay & Townsville. The recent flooding in Bundy might hold them back a while, but the broad indicators do suggest that Bundaberg is set to improve. Three Queensland markets are knocking on the recovery door, so to speak, and these include Ipswich, the Gold Coast & the Sunshine Coast.
The recovery phase is characterised by these measures:
- Rising sales
- A return to price growth, albeit usually quite mild
- Improving yields
- More building activity
- A more equal market i.e. not a buyer’s or seller’s market
Wider market influences
So back to the original premise of property cycles, here are my thoughts on what drives the cycle:
Liquidity – the availability of funds & their cost drives the cycle. When there is more money available & it is cheaper (like now), this helps to improve the property market. When the opposite takes place, then the residential cycle enters a decline. The RBA wants this to happen – an improving market leads to more sales, building activity & general spending. This means more government receipts; more employment & better company profits. When things are getting too heated – i.e. inflation is rising – the RBA will lift the cash rate, making money cost more.
Economy – you need a job (it used to be a full-time one, but those rules don’t really apply in today’s portfolio-orientated career world), to borrow & buy a property. So business profitability first, then employment creation are important factors which influence the cycle. This is why we regularly report on jobs & company profits, even if it is just as one of the three items in Saturday’s Weekend 3.
Confidence – the “animal spirits,” as John Keynes once called them. Hard to pinpoint; even harder to predict; but bloody important. These days, we seem spooked by every little microscopic detail, much of which means very little in the scheme of things. Confidence is slowly getting better. It should be much higher. Our current skittish nature is holding back the housing recovery.
Returns – when residential returns start to become competitive & also are seen as less of a risk, investors start buying again. This is now happening. Gross rental yields have improved by about 0.5% over the last 12 months. This attracts the more experienced investors. The novices start buying once the general media start reporting positive property stories on the nightly news.
Demand – not just population growth, but household creation. In short, this equates to more “bums on seats”. Australia’s population growth rate has increased significantly in recent years, creating the need for more new housing. Often, new migrants (and of course an increase in more babies being born), are housed in our existing stock. As we have outlined in past posts, we have quite a bit of spare capacity in our established housing market. But something happens as the residential market recovers – caused by a mix of the elements above – and the demand for new property rises. Parents help get their boomerang 30-year-olds into their own place; other relations leave the somewhat crowded house for a place of their own & so forth.
Scarcity – new supply falls short of the increasing underlying demand & the amount of residential stock for sale & lease drops. More people go to auctions, open houses & display suites to find a crowd; offers being made & increasing contracts being executed.
Human nature – the “wax & wane” as I like to say in my presentations…..being overly cautious (like now) keeps the housing market subdued, whilst greed drives it over the top. As a general rule, we believe the worst & when we think we want something, we must have it. “No” & “More” are two of the first words that most toddlers learn to say.
Pity those words aren’t more in balance at the same time. Right now, we need a little less “No” & a bit extra “More”.
Article originally published in Matusikmissive.com.au 19/3/2013
Sydney Baby Boomers drive real estate boom in Brisbane
A MIGRATION of cashed-up Baby Boomers from Sydney will lead to a real estate boom in Brisbane, according to property investment experts.
A Property Investment Professionals of Australia (PIPA) members’ survey revealed that Brisbane was regarded as the best capital city for property investment.
Of the members who participated in the survey, 46.15 per cent rated Brisbane as the best capital for investment prospects in 2018.
PIPA chairman Peter Koulizos said the Queensland capital was expected to boom as a side effect of the Sydney property boom happening when Baby Boomers were looking at retiring.
“People that have a lot of equity in their home can retire or semi-retire by selling up and buying a home in southeast Queensland,” Mr Koulizos said.
And with the median house price in Sydney more than $1 million, he said this would give them a sizeable pile of cash left over after buying a home further north.
“That is because there is such a big price difference between Brisbane and Sydney,” he said.
A PIPA survey from last year also rated Brisbane as the best capital city in which to invest, but in the past 12 months the average house price has increased by just 2.9 per cent.
Mr Koulizos said a boom would come eventually, but picking the exact point was tricky.
“Property booms take a long time to gather momentum, I doubt you will see double digit growth in Brisbane this year but it may be different next year,” he said.
Melbourne was the next best investment option according to the survey, with 19.23 per cent believing it was a good place to invest, followed by Perth at 15.38 per cent.
Originally published: brisbaneinvestor.com.au
The property clock strikes big for hot spot areas
9 Lion St, Ipswich. Picture: realestate.com.auSource:Supplied
DESPITE last month’s previous lacklustre values, analyst Michael Matusik has identified the areas on the upswing.
While property values remained fairly stagnant during February, property analyst Michael Matusik has revealed where the housing market is on the upswing.
Mr Matusik’s latest property clock for houses, has Brisbane, Gold Coast, Logan, Redlands, Sunshine Coast and Gympie all in upswing.
He said a market’s position on the property clock was based on the strength and direction of key indicators including sales numbers, price and rent, demand and how much new supply there was.
His latest Matusik Missive also listed Ipswich, the Fraser Coast and Noosa markets as heading into upswing territory.
Ipswich has many beautiful homes, often at prices well below what something similar would cost in Brisbane’s suburbs. A four-bedroom home at 9 Lion St,Ipswich is listed for $879,000.
The land the home sits on was bought in 1904 from the family of the then Ipswich Mayor Mr Pettigrew. A home was built on it in 1907.
The period home has 3.5m high ceilings, VJ walls, period window, and timber floorboards which have all been restored.
The home has two new bathrooms, a large separate dining area and study. It is listed through Steve Athanates of NGU Real Estate Ipswich.
On the Gold Coast at Robina, 196 Easthill Drive is listed for more than $850,000.
The three-bedroom home is within the Glades Golf Community.
It has formal and informal living and dining areas, and an outdoor entertainment area with a swimming pool nearby.
It is listed through Ian and Linda Mills of McGrath – Palm Beach.
On the Sunshine Coast at Noosaville a home at 15 Bluebell Court is listed for offers of more than $740,000.
The three-bedroom home is in a cul-de-sac in a residential pocket bordered by the Lake Doonella Reserve.
The single-level home has open plan living and dining areas. An outdoor area overlooks the pool and reserve at the rear of the property.
It is listed through Tansy Grant and Justin Sykes of Ray White – Noosa.
Originally published: brisbaneinvestor.com.au
Where to invest: These are the suburbs where house prices are tipped to grow
Annaliese Bullock, 27 with husband Jared, 27 and daughter Lyla 5 months sold their Burpengary before it even went on the market. Picture: AAP/ Megan Slade.Source:News Limited
THESE are the rising stars of Brisbane’s property market, the 27 growth suburbs investors need to know about.
INVESTORS chasing capital growth in Brisbane are spoiled for choice, with a new report identifying 27 suburbs where house prices are tipped to rise — and more than half of them have a median price of less than $500,000.
Property analyst Terry Ryder has identified the rising stars of the property market — where sales are rising steadily and house prices are set to follow. And they’re not the inner-city, blue chip suburbs you might expect.
The report examines sales activity, rather than prices, to determine the best and worst local government areas for property market growth.
The Moreton Bay region has 10 rising star suburbs where sales have been steadily increasing including Banksia Beach, Bellmere and Deception Bay.
Quarterly sales in Burpengary have risen from 69 to 97 in the past six quarters, while at Sandstone Point, sales are up from around 40 per quarter to 55 to 60.
Homes are selling so fast in the area that Jared and Annaliese Bullock just sold their four-bedroom house in Burpengary for $475,000 before they had a chance to even put it on the market.
Mrs Bullock said she contacted an agent at RE/MAX Ultimate, who brought through a couple of potential buyers and the offer was made within days.
But she’s not too surprised, given how close the suburb is to the train station, shops and the highway. The couple also recently bought two units as investment properties in nearby Caboolture. Acacia Ridge, Algester, Eight Mile Plains, Kuraby and Sunnybank Hills are also predicted growth areas.
“It’s the affordable, outer areas that have got the most activity at the moment,” Mr Ryder said.
“The infrastructure is pretty good, with train links to the centre of the city, and there’s lots of shopping centres and good amenities.”
“The sweet spot is to be about 200 metres from a school, a shopping centre and a train station.”
SUBURBS WHERE SALES ARE RISING
Acacia Ridge $402,000
Banksia Beach $550,000
Caboolture South $290,000
Deception Bay $345,000
Eight Mile Plains $788,000
Ferny Grove $595,000
Kippa Ring $415,000
Mt Warren Park $390
Sandstone Point $420,000
Sinnamon Park $720,000
Sunnybank Hills $660,000
Victoria Point $522,000
Originally published: www.news.com.au
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