Many property commentators won’t forecast the year ahead and discuss what and where they think you should be buying in 2020. 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.
2020 Hits: Canberra will sustain the strong growth it saw in 2019 and will only get stronger from there. A number of noteworthy infrastructure projects will also continue to fuel Adelaide’s property market and Brisbane will also make a rise.
2020 Misses: 2020 will see Sydney and Melbourne continue to feel the pinch. The Tasmania bubble will finally be popped. And there’s one more loser, Airbnb.
Top three best performers for 2020 according to Porter are Canberra, Adelaide and Brisbane.
Canberra has bucked the trends for 2019 and stayed positive when the rest of the country retracted in values, according to Porter.
“Canberra had strong growth over the past year and was able to sustain it because of really strong government employment and it’s a very robust market, strong economy and sustainable location,” says Porter.
“There’s actually a lot of employment opportunities and not all of them are from the government although they may feed from the government,”
“Anyone who owns property in Canberra has actually done really well in the past 12 months as it is in the growth stage of the cycle.”
Canberra and Hobart were the only two capital cities to have positive growth for the 12 months of 2019. Canberra, however, is a more sustainable location compared to Hobart who whilst may have had strong growth in the past 12 months is certainly now in a concerning position as too many investors have hit the one location in a short period of time, which can have a devastating effect.
Porter believes the stability will continue now the election is over and the emolument landscape is still strong for the area.
Furthermore, Adelaide will be a star performer again for 2020, according to the Suburbanite CEO.
“With hospital project at $2.4 billion, Military Boats project at $39 mil and a range of other employment drivers pushing the market along we’ll see solid growth,” says Porter.
“Affordability is a positive in Adelaide, with free standing houses in the suburban areas around the city being as little as $450,000,”
“There’s no secrets the city has been voted time and time again as one of the most liveable cities in the world.”
“Adelaide is set to continue seeing 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.”
Porter deems Adelaide followed closely by Brisbane.
“It’s a popular option for Sydney and Melbourne first home buyers and younger families looking to move to more affordable areas with employment, which is creating strong internal migration,” she says.
“It also has the Queens Wharf project kicking into its peak construction and that is reported to be creating 2,000 new construction jobs to the area.”
Brisbane dwelling values increased by 0.8% in November, 2019 so it is moving modestly in the right direction.
QBE previously predicted that Queensland will have the highest internal migration of all the states for 2019-2021.”
Anna Porter’s Losers for 2020 are Sydney, Melbourne and Tasmania.
Sydney and Melbourne will continue to feel the pinch with affordability still at all-time lows, access to money still tight and a lack of government spend and state level stimulus is putting downward pressure on the market, according to Ms Porter.
“The back of 2018 saw some increased sentiment but this will be short lived,” says Porter.
“But, when you’ve had consistent strong growth in the years prior, you’re still in a much better position overall,” Porter shares.
“We always expect to see a correction come through after such year on year growth which was a nice relief for people trying to get into the market especially first home buyers.”
“Anyone who has properties in Sydney or Melbourne still would have a lot of equity sitting in their home,” she says.
Buyers are still 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 won’t 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.
Tasmania will be the market to really feel the pain for 2020, according to Porter.
“Interestingly, Hobart performed well for 2019 and had 4.2% growth,” shares Porter.
“This mainly came from it being the cheapest market in the country, so when investors had trouble accessing money in the past 12 months, a lot of investor turned to Hobart where they could buy an investment property for the price of a luxury car.”
When a lot of investors just didn’t have any real significant borrowing power for mainland, capital city style, blue-chip investments they looked at what their alternatives were and flocked to Hobart which drove prices up.
“But this was not built on any sustainable indicators like employment, migration or infrastructure spend, so it will be short lived,” according to Porter.
“There’s 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.
There’s one more LOSER for 2020…
Airbnb is likely to meet with some further headwinds for 2020, shares Porter.
“With less tourism dollars being spent, more competitive market place with increasing participants and potentially greater regulatory control will prove challenging for the share economy company,” says Porter.
“A number of Airbnb management companies have come under scrutiny in 2019 as they have not been conforming to the legislative framework and have been found to be mismanaging funds, which will only create further challenges for the actor.”
These factors will make the profitability of this sector a lot less achievable for smaller operators.