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Why does the property market cycle?

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Moreton Investor (5), Property Management, Real estate Moreton, Mortgage Broker Moreton, Moreton property market, property market cycle

The residential property market does cycle. Moreton Investor (5), Property Management, Real estate Moreton, Mortgage Broker Moreton, Moreton property market, property market cycle

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.

Recovery markets

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

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Gold Coast house values record the biggest growth in Queensland

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Gold Coast house values record the biggest growth in Queensland

The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.

GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.

The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.

Unit prices are up 1.9 per cent to $428,000.

Gold Coast house values record the biggest growth in Queensland
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.

REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.

“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.

“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”

A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.

Gold Coast house values record the biggest growth in Queensland
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams

REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.

“I expect the market to remain strong,” he said.

“There is a heavy amount of interstate buyers moving here.

“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”

Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.

Gold Coast house values record the biggest growth in Queensland
The Gold Coast property market is expected to remain strong.

“We have some of the best health facilities in the country and our universities are world recognised.

“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”

The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.

It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.

Gold Coast house values record the biggest growth in Queensland
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham

Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.

“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.

“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”

Source: brisbaneinvestor.com.au

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Australia’s golden triangle of opportunity

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Australia's golden triangle of opportunity

It was great to be back on the Gold Coast for the 21st annual Australasian Real Estate Conference (AREC), attended by over 4,000 of Australia’s best industry professionals.  While I was there I was once again reminded of how much potential the South-East Queensland property market is offering both sea changers and investors at this stage in its market cycle.

In my view, Brisbane is the best market in Australia currently for short to medium term price growth, with the value gap between it and the other big East Coast capitals as large as I’ve seen it in many years.

When you factor in the key drivers for future growth – liveability, affordability, scale and future economic prospects, they all suggest that Brisbane is a market to invest in.  Check out the latest statistics from CoreLogic below.

Value gap – median house prices 

Brisbane $536,286

Melbourne $821,006

Sydney $1,019,093

Value gap – median apartment prices

Brisbane $385,121

Melbourne $573,673

Sydney $749,765

I’ve been bullish on Brisbane for many years and in hindsight, I called its next growth phase a couple of years too early. It’s had some growth in recent years but there is a lot more to come over the next few years.

According to McGrath’s top prestige agent in Brisbane, Alex Jordan, one of the dominant trends today is downsizers buying up luxury apartments.

Alex says: “Despite the reported oversupply in Brisbane’s inner city apartment market, we are seeing great strength in the prestige apartment sector.

“The luxury apartment market ($1M+) is driven by owner occupiers, particularly baby boomers and empty nesters, who are attracted to less maintenance and better accessibility.

“Popular suburbs include New Farm, Newstead, Teneriffe, Kangaroo Point, South Brisbane, St Lucia, Paddington and the Brisbane CBD. These areas offer a desirable lifestyle with an abundance of shopping, dining and entertaining precincts at their doorstep.”

South East Queensland has so many options for asset-rich, cash-poor southerners. Many of our customers in Sydney and Melbourne are looking closely at South East Queensland both for investment and a potential sea change. I believe its affordability will continue to attract record levels of interstate migration.

If you live in Sydney or Melbourne and you’re struggling with the mortgage and cost of living, Brisbane is a fantastic alternative. It offers big city job opportunities, high quality education options and the chance to transform your financial future.

The boom delivered Sydney and Melbourne home owners a capital gain of up to 75% – that’s enormous new equity that could be cashed in to fund an amazing new lifestyle with far less mortgage stress up north. Plus, you’d be buying in just before Brisbane’s next wave of price growth. It’s the perfect scenario.

I believe the area from the Gold Coast to Toowoomba and up to the Sunshine Coast is Australia’s golden triangle right now.

Toowoomba, with its expanded airport facilities which have opened up easy access to the south, is the perfect and affordable treechange destination. Known as Queensland’s Garden City, about 2,300 people moved here from Brisbane last year for its cheaper house prices and enjoyable regional city lifestyle.

Both the Gold Coast and Sunshine Coast are also appealing sea change options benefitting from a raft of new infrastructure that will drive further population growth and generate more local jobs.

Brisbane is one of the world’s great cities but I don’t think this is fully realised as yet. If you haven’t been to Brisbane for a number of years, get on a plane. This is a thriving city that offers many of the lifestyle amenities you love about the southern capitals but at a much cheaper price.

I think Brisbane will also become very attractive to migration and investment from Asia in the years ahead.

South East Queensland is offering opportunity everywhere for both owner occupiers and investors alike. Now’s the time to consider what Australia’s premier lifestyle market can do for you!

Source: brisbaneinvestor.com.au

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These are the top 3 spots to bag a bargain in Brisbane: Ryder

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These are the top 3 spots to bag a bargain in Brisbane: Ryder

Property analyst Terry Ryder has picked three spots to invest in Brisbane. Picture: Richard Walker.Source:News Corp Australia

WANT to know where to invest in Brisbane that’s both affordable and offers the prospect of price growth? Look no further…

THERE are only three areas in Greater Brisbane that offer affordable real estate with growth potential, according to property analyst Terry Ryder.

The founder of Hotspotting.com.au has identified three precincts where there are plenty of houses well below the median Brisbane house price of around $530,000, close to transport links, shopping and jobs nodes, and with median rental yields in the 5 to 5.5 per cent range.

Here they are:

These are the top 3 spots to bag a bargain in Brisbane: Ryder

Hotspoting.com.au director Terry Ryder at his home in Queensland.Source:News Limited

1. Goodna-Redbank Plains, Ipswich

These suburbs are at the eastern fringe of the Ipswich local government area — the part closest to Brisbane, the motorway and the train line.

They are also close to the Springfield masterplanned community, which has an array of modern facilities, including university campus, hospital and commercial-retail precincts.

“There are numerous big shopping centres and major employment nodes nearby, with the recently announced $5 billion Defence vehicle contract focused on this precinct as a major new jobs creator,” Mr Ryder said.

These are the top 3 spots to bag a bargain in Brisbane: Ryder

Terry Ryder thinks parts of Ipswich would make a good property investment. Picture: Chris McCormack.Source:News Corp Australia

 These are the top 3 spots to bag a bargain in Brisbane: Ryder

Terry Ryder thinks Redbank Plains is a good place to invest in property.Source:News Limited

2. Eagleby-Beenleigh-Woodridge, Logan

Mr Ryder said these older suburbs in Logan had median house prices in the $300,000s and were clustered around the train line and the Pacific Motorway, both of which link central Brisbane to the Gold Coast.

“This is also where there is an impressive shopping offering, including major bulky goods retail, and well-established infrastructure like schools and medical facilities (as well as a surprising number of golf courses).

3. Moreton Bay

The suburbs of Beachmere, Burpengary and Upper Caboolture have experienced double-digit growth in their median house prices in the past year, according to Mr Ryder.

They are all close to major road and rail links, but aren’t as expensive as North Lakes has become.

Even in the Redcliffe Peninsula, where most of the water-focused suburbs are, the median house price is only in the $400,000s.

And the Peninsula now has rail links to central Brisbane, making it an even more appealing prospect.

These are the top 3 spots to bag a bargain in Brisbane: Ryder

The Moreton Bay Rail link has made the area more appealing to property investors, according to Terry Ryder. Picture: Tara Croser.Source:News Corp Australia

Source: www.news.com.au

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