Many property commentators won’t forecast the year ahead and discuss what and where they think you should be buying in 2018. What markets are hot? What markets are not? What should you avoid?
Anna Porter, principal of Suburbanite, expert property market commentator and keynote speaker explains her opinion on the year ahead for Australian real estate. She gives a non-biased perspective to help not only everyday Australians, but mum and dad investors, first time investors, SMSF, time-poor executives, savvy investors, first home buyers, busy business owners and high level organisations with successful investing in 2018. As a former valuer, Anna had seen many mortgagee in possessions tear families apart and take away from the hard work of everyday Aussies. This disheartened her so she now goes out of her way to help individuals avoid the traps of the spruikers and the cowboys in the industry today.
Adelaide infrastructure is a key motivator; but beware the ‘Zombie Apocalypse zone’
There will be a “bloodbath” in South-Eastern Brisbane
There is another good 12 months ahead of growth for Melbourne in suburbs such as Frankston
Don’t put all your eggs into the ‘Badgery’s Creek’ basket for investing in Sydney, you need to skip all the way down to Goulburn to see reliable growth
Reap the benefits of the ‘Mr Fluffy’ saga in Canberra. Get. In. Quick.
Perth is on the watchlist for purchasing opportunities in 2019/2020 – if you bought there already, you’ve made a mistake
The good times are still rolling in Adelaide
We still have eyes on Adelaide. It’s a fantastic opportunity for investors at the moment. You can get great properties for under half a million dollars but you don’t want to be buying units, they don’t perform as well. Definitely look for free-standing houses,
It’s the right timing in the cycle. It’s just starting to go into the growth stage and all the numbers are starting to align. Low vacancy rates, high rental demand, days on market for selling are reducing so there’s great buyer demand, and the infrastructure projects are just unbelievable. The Royal Adelaide Hospital, Adelaide’s game-changing infrastructure project is the third most expensive building in the world, the most expensive in Australia.
The new world-class hospital has just completed construction. The flow on effect for The Royal Adelaide Hospital will see catering companies, cleaning companies, floralist companies and basically anyone supplying services into the hospital and around the hospital benefiting from the project.
There’s no documents to show that the site next door; The Adelaide University, and the Hospital will partner, but it’s a very good possibility, with student demand then subsequently increasing.
Submarines, Frigate Fleets and Corvettes – major military boat rollout, Foreshore upgrades, $330 million Adelaide Casino Upgrade, proposed 6-star premium hotel facility, the airport expansion are just some other major projects to name a few.
The government is predicting nearly 4000 new jobs to Adelaide. The projects aren’t just building bridges and railways, they’re creating jobs.There has also been talks of AirBus bringing their techhub into Adelaide as well.
It’s not all sunshine and gold stars though. Areas such as Elizabeth, are known by my team as the “Zombie Apocalypse”. You drive around the streets and there’s people sitting on the curb with casks of wine at 9am in the morning. These types of areas are questionable for landlords, and we avoid investment in these pockets.
Other areas as far as Christies Beach, around 45 minutes south of Adelaide, offer a real tourism coastal lifestyle and are attracting a lot of interest from intestate investors. Down there, some of the development planning has been revised so higher density building can be developed here. I believe this will soon become over-supplied because people don’t commute an hour to work in Adelaide like in Sydney and Melbourne, they just don’t have to. Even though the planning has been changed, it will be a short lived boomed, driven by investors not by locals.
So, when you consider Adelaide, stay within half an hour to the city and only look at established properties, nothing off the plan.. Accordingly, distance from the CBD is a key player in Adelaide investment.
On to Melbourne and Victoria
Melbourne inner-CBD units are incredibly over-supplied, don’t touch them. But in terms of townhouses, villas and free-standing houses, yields are down as low as 3% in some of the inner-CBD suburbs and these aren’t a great buy. But further down towards Geelong and Frankston you may not be buying at the very low end of the cycle but there’s another good twelve months ahead of growth. There’s still opportunity in these pockets for 2018.
And the much discussed Sydney market
Sydney is pretty much done and dusted. If you want to invest in NSW you will need to skip over Western Sydney (despite popular opinion) and head down to Goulburn.
The ship for Wollongong has also well and truly sailed. Suburbanite were buying properties there back in the last three to four years. In Dapto, we purchased a property for $340,000. Today the property is worth in excess of $600,000. You don’t want to be buying someone else’s growth.
The growth train for the Central Coast and Western Sydney including Penrith has also departed.
Our advice? Don’t put all your eggs into the basket of chasing growth out of the new airport at Badgery’s Creek. You don’t know where the flight paths are going to be; you don’t know where the infrastructure and facilities are going to be.
You could end up buying a property that turns out to be right under a flight path and is isolated in amongst industrial properties. You don’t know what’s coming, there isn’t enough information yet and any growth is still a long way off. To capitalise and really leverage off the airport there, you want to get into the hubs, the commercial hubs that will benefit from it, which will be Liverpool and Parramatta, the cities closest to where it will be. It’s still the wrong-timing in the cycle for this but.
The future for Brisbane
Brisbane has a lot of vacancy coming through, steer completely clear of units, they’re incredibly over-supplied and there will be a bloodbath in the unit market over the next couple of years. Lending will tighten, values will retract and rent will be hard to maintain.
Have a unit investment in Brisbane? My advice…GET OUT!
So, what’s on the watch list?
Goulburn: for a semi-regional location the stats are great, with about 12 percent of growth. The gaol is there, another mini-super max is coming, there is the police academy and a number of major institutional style organisations only 45 minutes from Canberra with potential for a nice property for about $400,000 – $500,000.
And the nation’s capital…
Further south, Canberra is also a great area to be investing in. There is a lot of growth coming through and a lot coming off the back of the ‘Mr Fluffy’ saga. Not a cartoon character gone wrong but rather a mishap by ‘Mr Fluffy’ where loose fibro asbestos was pumped into ceilings that the government quickly realised killed people so now must acquire these homes.
There’s over a thousand homes on the repossession list under a four year buy-back scheme, so what does this mean for investors? Well, in some areas they are pulling more supply out of the market that can be handled, yet there is still demand, with a lack of supply which creates growth.
The rental market is also booming. What’s the downside? Well, at least $600,000 is needed to get a decent property in the Nation’s Capital. There will be a great shortfall, so land-tax implications need to be checked first.
If you have the appetite for a bigger shortfall to chase the higher growth or have a tax problem you want to get around, investing in Canberra should do the trick.
The property market in Perth
Heading over to the Western side of the country now, we have eyes on Perth. This boat has not been missed. It’s not the same as the stock-market where you typically buy low and sell high.
Perth has gone further and further backwards. In fact, if you bought there two to three years ago like some investment firms recommended, your value has decreased and done a backwards turn and you have certainly been contending with huge vacancy rates.
So why buy three years ago and deal with all that pain? Perth is now on the watch list, not necessarily for 2018, but maybe 2019/2020. The start of the recovery is happening and the timing is looking positive.
We’ll know the timing is right when the vacancy rate comes down to acceptable levels of below 3 percent. The number of days a property is on the market also needs to decrease. It shouldn’t take 150-200 days to sell a property. This means the supply and demand curve is wrong. Also, a little positive growth should filter through unlike last year where negative growth was still coming through in single digit numbers.
Yield on the apple isle
Chasing yield? Tasmania is your place. The growth there has plenty of debate amongst industry professionals. It is a yield play, not a growth play.
What should you avoid?
Darwin is still a concern. Stay away. It’s still retracting and seeing a lot of pain. Tenants are paying as little as $100 a week. Indicating the market is really struggling.
Units…specifically in Brisbane, Melbourne and Perth. Stay away. Chances are investment firms trying to get you into a unit in these CBD suburbs are getting a big fat kickback from the developer behind the scenes. Just because the unit market isn’t performing, doesn’t mean the housing market is in the same boat.
Down the south-east pocket of Queensland, towards Logan and Ipswich, are going to start to see some pain I think towards the end of 2018. We’re starting to see the local council cracking down on a lot of the granny flats being illegally rented. A lot of people have purchased these properties with the idea of getting a dual income, but this is being stripped away from them. There is also a little bit of pressure on interest rates, and vacancy rates are creeping up. There is a whole lot of new stock coming to the market also with ample house and land packages available for purchase. This is starting to push a huge amount of supply into the market. Towards the later of 2018 and start of 2019 this too will be an absolute bloodbath.
Have you purchased a property in these areas in the past? It may be time to start thinking about jumping out whilst you can still keep secure tenants and make some money. As soon as the interest rate pressure comes through and the vacancy creeps further up it will be a disaster. Something we call a boom and bust market.
Gold Coast and the Games
The Gold Coast has the Commonwealth Games coming up and will continue to plod along as it always has. It will perform reasonably steady up until the Games and then after there will be a correction and a little bust. This will be a short tale to tell.
And further north…
Slow and steady will win the race in Brisbane, it will likely be consistent growth. Some of the markets that haven’t kicked yet like the townhouse market and areas such as Chermside will start to roll through some growth. The unit market will still suffer and put pressure on the rest of the market. If this could be tidied up in the DA process, it would be great. For instance, council could stop allowing units to be built and take a little accountability, but this is unlikely.
A tip for young players – renovate in Brisbane. Renovated properties in Brisbane sell a lot better. Add value and you will see an uptick.
And that’s a wrap…