Many property commentators won’t forecast the year ahead and discuss what and where they think you should be buying in 2019. What markets are hot? What markets are not? What should you avoid?
Anna Porter, valuer, property commentator and Suburbanite CEO explains her opinion on the year ahead for Australian real estate. Anna and her company are totally unaligned with any particular real estate products, markets or people. Her commentary is well-researched by her team of valuers and analysts, and is unaffiliated and unfiltered – she tells it how it is.
As a former valuer, Anna had seen many poor property decisions lead to financial distress, and even mortgagees in possessions tearing families apart. This disheartened her so she is now driven by helping individuals avoid the traps of the spruikers and the cowboys in the industry today.
2019 Hits: Adelaide is the infrastructure state with some of the biggest and strongest job-creating projects in the country. The hospital project is significant enough that it sits on the world stage, coupled with renewed manufacturing activities on the old Holden site creating thousands of new jobs. This will be a win for Adelaide’s property market. Canberra’s pre-election “pause button” in the property market spells opportunity for investors in the first half of the year.
2019 Misses: 2019 is the year of reckoning for Tasmania and investors should heed this warning. The year ahead will see the market shift and the back end of 2019 or early 2020 will see the past year of growth wiped out with the volatility that has been brewing throughout 2018, unbeknownst to many investors and the less experienced investment ‘gurus’ who have been buying up in Tasmania like a Barney’s end of year sale. Melbourne will start to turn a corner and anyone who has invested in Melbourne metro in the past 6 months will likely feel a bit of a sting in 2019. Those who purchased 12 months of more ago, or went a little further afield to Geelong or some of the regional hubs will be safer.
Key takeaways
- Adelaide infrastructure is a key motivator; but beware the ‘Zombie Apocalypse zone’
- The “bloodbath” continues in South-Eastern Brisbane
- 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 pre-election “pause button” 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
- 2019 is the year of reckoning for Tasmania
- There is a ‘sting’ coming to Melbourne especially in Melbourne metro
The deep dive for 2019 forecast
Tasmania
“2019 will be the year of reckoning for Tasmania. They’ve seen some great growth for 2018 off the back of heightened investor activity chasing a cheap buy with high yields,” says Anna Porter.
“A two-tier market reminiscent of the Gold Coast has been created in years gone by – too many investors and a lack of population growth, lack of infrastructure spends (at any level that will compete with the other states), lack of employment drivers and a total oversupply of rental stock from the investor activity, leading to volatility,”
“We’re expecting to see high vacancy kick in, low growth in values, some distressed asset sales, and a cooling off of investor activity that will dampen buyer demand and general buoyancy,” says Porter.
“The Tasmanian market will shift in 2019. The back end of 2019 or early 2020 will see the past year of growth wiped out with the volatility that has been brewing throughout 2018, unbeknownst to many investors and the less experienced investment ‘gurus’ who have been buying up in Tasmania like a Barney’s end of year sale,” concludes Porter.
Adelaide
“The Royal Adelaide $2.4 billion hospital is now open and the city is already reaping the benefits of jobs coming out of this project. The next major project, being the defence contract for manufacture and maintenance of military boats out of Port Adelaide will be kicking off, as well as the recent announcement by Lionsgate that they will be adding another 1200 jobs to the former Holden site with renewed manufacturing activities in batteries and other innovative sectors,” says Porter.
“Adelaide is set to see thousands of new jobs which will underpin employment, financial security, cash flow into the economy and in turn the property market.”
“It’s not all sunshine and rainbows for Adelaide though. Some pockets to the north of the state 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.”
Brisbane
“Brisbane is finally starting to stabilise and modest growth can be expected ahead for 2019 in the Brisbane metro for free standing houses and small townhouse/villa complexes. It will still be a blood bath for South Eastern QLD due to oversupply issues, and the market there being driven predominantly by investors, couple that with a lack of employment and you have a real volatility underlying that location,” says Ms Porter.
“Major projects such as the Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, Adani Coal Mine are all on the table. This will offer a boost for the Brisbane economy and will be the major underpinning factor for the housing market to start to see the growth filtering through, but given some of these won’t kick off for a few more years we don’t expect to see the full impact in 2019,”
However, “the unit market and large medium density sectors are still set to struggle from oversupply and significant value declines in units and rental retraction is expected,” warns Porter. “We’re forecasting as much as 20-30 percent value reductions over the year ahead for the unit sector in the Brisbane CBD.”
“Buyers should look further to the future for stronger Brisbane returns in the housing sector, but rest assured, they’re heading in the right direction into 2019,”
“The real boost for 2019 is the internal migration expected to flow through Brisbane off the back of Sydney and Melbourne’s affordability crunch. QBE predict that Queensland will have the highest internal migration of all the states for 2019-2021.”
Melbourne
“Melbourne still has the fastest growing population in Australia, however with prices having seen the strongest growth over the past three years in a decade it has reached a ceiling and we expect to see a softening in the Melbourne market for 2019. This will result in some small declines and a stabilisation effect,” warns Porter.
“Melbourne will start to turn a corner and anyone who has invested in Melbourne metro in the past 6 months will likely feel a bit of a sting in 2019. Those who purchased 12 months of more ago, or went a little further afield to Geelong or some of the regional hubs will be safer.”
Sydney
“The missing middle policy in Sydney will encourage development of medium density dwellings. This will create a glut of development but not the strong price growth to support profitable projects,” says Porter.
“We’ll see many experienced developers hold onto sites rather than come out of the ground for 2019 and this will start to slow supply of high density, but it will be replaced by the medium density sector due to the planning reforms,” predicts Porter.
Buyers are urged to not put all their eggs into the ‘Badgery’s Creek’ basket for investing in Sydney, this project is still a long way off and the benefits wont be seen until the market recovers. Which is a long road ahead for the Sydney basin to see growth again. With Newcastle, Central Coast and Wollongong following closely in Sydney’s footsteps. We would suggest investors look to interstate markets to reap a return in the next few years.
Although population growth in Sydney is strong, with record breaking growth rates reported by the ABS, price growth won’t follow this.
“Price growth in Sydney will not be strong, and we expect to see further declines in the middle to lower price points. But this will stabilise towards the end of 2019 but growth is still a while away,” says Porter.
“The prestige market will still see some activity with the high capacity buyers who have been sitting on the side lines for the past few years waiting for the tide to turn. They will start to get back in the mix of the market but they will be wanting good buying power. These buyers will not be paying the premiums of years gone by but we also don’t expect to see too much price discounting happening across the board in this sector. A unique, quality prestige property will still sell well, it will just take more time to find the right buyer.”
Canberra
“For much of 2019, Canberra will sit still. With the looming election, more uncertainty will be thrown into the employment sector until the second half of the year,” says Porter.
“Once the election is over, we expect to see the market go from strength to strength in the back half of the year. The rental market will remain tight as people will be making short term property decisions such as taking up a rental for six months, compared to a long term decision such as buying,”
“The ‘pause’ button on the Canberra market for buyer activity can make for a good investment opportunity to pick up good property without as much competition from other buyers.”
Perth
Perth is STILL on the watch list for purchasing opportunities in the back half of 2019.
“With values and growth data starting to finally stabilise, we are just waiting on the vacancy rates to come down to see a market that is considered balanced. It is still a bit toppy with the rental market so investors should hang back just a little longer,” says Porter.
“Home buyers might still be able to get some good buying power in the early part of the year but we expect the demand to start to shift a little toward the back end of the year, creating a slightly more buoyant market.”
Darwin
“Darwin is still in retraction and struggling from the soft employment market, lack of migration and infrastructure spend. This isn’t expected to change much for 2019, if anything we could see it stabilising toward the latter part of the year but price growth is not expected just yet,” says Porter.
“We still feel investors should take back seat on Darwin until the market recovers further.”