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We've seen some interesting changes in the Australian market very recently, below we provide you with a quick snapshot. We also indicate where we believe each capital city sits in the current property cycle and our initial thoughts on how they fit with your brief. All data is taken as of January 2019.

 

Sydney

Units

Houses

Following the trend, Sydney continues to hold the title of the largest value declines in Australia. At the beginning of January, Sydney values are back to July 2016 levels. The main contributing factors to the decline include a combination of stricter interest-only-lending, a slowing in population growth and an increase in rental vacancy rates. Furthermore, as we know the property market works in cycles, and Sydney was top of the pops for five years, so it is understandable that the market had to cool off from this. Simply put, supply now outweighs demand, with the inner west and Hills district has caught the worst of the decline. As the Sydney market continues to decline, investors and homebuyers who are ready to purchase have plenty of options and great leverage for price negotiations.

 

 

We believe another 5-7% will come off this market with a sustained period of flat growth before we see the market rebound again.

 

Region Recommendation: No

Melbourne

Units

Houses

Closely following Sydney’s decline, Melbourne’s dwelling values dropped 7% in 2018. The drop brought values back to the Melbourne market’s April 2017 levels. From a population growth rate perspective, Melbourne leads the charge nationally. Whilst the market is cooling, this will ultimately provide a softer landing than Sydney. This heightened by the fact there is major infrastructure happening and in the pipeline across Melbourne, again, positively impacting the labour market and unemployment rates. What we are seeing is a strong contingent of Melbourne locals, moving for greener, quieter pastures in the state. Many are moving to areas outside the city for affordable housing, such as Ballarat and Geelong. With continued infrastructure aiding an already strong economy, we can expect the trend of migration to these outer cities to become more popular. With affordable prices and high demand, these up and coming areas offer amazing opportunities for investors.

 

For Melbourne, we believe another 3-5% will come off before we see it plateau for the short-term. However, we believe the highest net migration nationally and continued infrastructure developments will see Melbourne rebound quicker than the Sydney market. When that is, time will tell. We are constantly monitoring the markets and if all the signs are pointing in the right direction, we will be sure to consider it for your portfolio if necessary.

Region Recommendation: We have not recommended Ballarat or Geelong for your portfolio as we need to lay a platform for cash flow early in your journey. Whilst we are seeing strong capital growth, yields are sitting between 3.5% and 4% and declining. Regions like Ballarat and Geelong are definitely worth consideration in the future for you, however.

Brisbane

Units

Houses

The Brisbane property market is slowly growing. Rental vacancy rates are down to 2.7% from the peak at 4.1% in January 2017. And with interstate migration numbers expected to continue gaining momentum, the vacancy rates are predicted to finish even lower at the end of 2019. Overall, Brisbane has an optimistic future ahead and has been in second gear for some time now. However, historically we see when the Sydney and Melbourne markets cool, Brisbane inevitably rebounds as the number one growth city nationally. All stars are starting to align, with the strongest net interstate migration, significant infrastructure underway and the resource sector on the rebound. Don't forget the low median house price currently in comparison to its eastern state neighbours. The time is now to get your foothold on the Brisbane property ladder.

 

Region Recommendation: Yes

Adelaide

Units

Houses

Adelaide saw a positive 1.3% annual growth for dwelling values in 2018.  At 1.3% growth, the city scores in mid-range compared to the other capital cities in dwelling values. Much like Brisbane, Adelaide has also seen a population growth due to interstate migration, which will partly explain the rising house and unit demand in Adelaide’s property cycle and the positive capital growth. For many years, the market has steadily flatlined, and this is the fingerprint of the Adelaide property market. There is some major infrastructure planned and due to commence in 2020/2021, which will provide a substantial flow of jobs, offsetting the recent automotive industry jobs cut, which affected Adelaide dearly.

Region Recommendation: Whilst we are not rushing into this market right now, we definitely see opportunities for your portfolio in the short-medium term.

Canberra

Units

Houses

Canberra has been the quiet achiever of the last two years with continued capital growth seeing it sit consistently second nationally - only behind Hobart. 

 

There are a number of key indicators that point to consistent capital growth being; in the latest ABS (Australian Bureau of Statistics) population data, the capital had an increase in population by 2.2%, sharing first place with Victoria. ACT tourism numbers have also hit record highs and Lonely Planet also named Canberra the third best global city to visit in 2018.

 

Infrastructure projects including the light rail construction (connecting the CBD with the outer suburbs) is now in full swing and the opening of the international airport terminal, with Singapore Airlines now flying four times a week to New Zealand and Asia and Qatar Airways operating a daily flight to the Middle East. Unemployment is also the lowest in the country at 3.6%, combined with the highest median income in the nation, fuelled, by the professional services sector.  

 

On the ground, the city and surrounding regions are a buzz of activity with new hotels, restaurants, cafes and bars opening or scheduled to open. Open houses are busy and once government housing areas are showing signs of gentrification. Good rental properties are in high demand, with vacancy rates at 0.9%.

 

Region Recommendation: We are big advocates of the Canberra market for both long-term and short-term investing. As per our strategy, we like this market for the granny flat play. They are in demand and all leading data points to this being a strong and viable option for your portfolio.

Perth

Units

Houses

What comes up must come down and unfortunately for Perth, this law holds true as they are reaching the bottom of the property cycle. In 2016 and 2017, Perth experienced a decline in their gross domestic product by 2.7%, plunging their economy into a recession. In 2018, the economy made progress towards recovery mostly due to an increase in the mining industry. Last year, Perth’s population growth also began to see a minimal rise and is expected to continue into 2019. As we see the data point to unemployment rates declining, vacancy rates declining and supply and demand ratios flip, we will be ready to jump into this market.

 

Region Recommendation: Not now, but definitely in the near future.

Hobart

Units

Houses

We believe Hobart's property cycle is nearing peak conditions for both houses and units. Hobart has been the nations shining light from a numbers POV for the last three years. Incredibly low vacancy rates, strong yields and coming off a low base, it was a great market for investors. But, we have always been cautious of this market and believe as quick as it can go up, the quicker it can come down. With retail and hospitality the major economic drivers and limited infrastructure planned, it's hard to see how the market can withstand continued growth - wages simply won't support this. We are also seeing millennials flee to the mainland for work and tertiary education and baby boomers moving in for retirement. That doesn't leave too many to work and support the economy. Of course, there's tourism and agriculture, however, for us, that's not enough to support continued growth.

Region Recommendation: No

Darwin

Units

Houses

Darwin finds itself at the bottom of the property cycle with high declines of annual capital growth, and high rental vacancy rates - both predicted to increase further in 2019. However, there is a silver lining to every cloud, with fair value rapidly returning to the housing market, after many years of being overvalued. Once the downturn has passed, it will be fantastic conditions for buyers. Until then, it's a sit and watch from the sidelines scenario.

 

Region Recommendation: No

* Milk Chocolate price data used on this website is sourced and relies upon information supplied by a number of external sources (including governmental authorities). This data is supplied on the basis that while Milk Chocolate believes all the information provided will be correct at the time of writing, it does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by you, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information on this website through any cause whatsoever and limits any liability it may have to the amount paid to the external sources for the supply of such information.