3 bits of good news if you’re interest in property investment

Here’s the usual drill – 3 minutes of your time and all with a positive feel.  A bit hard of late – given Europe, China and the consistent federal stuff-ups, but here goes.

1. More affordable

Falling interest rates and stagnant house prices have seen housing affordability improve across much of the country.

Sydney and Perth are the two exceptions where affordability deteriorated in recent months.  Housing, however, became more affordable in the remainder of the Australian capitals with the average 7% improved over the last three months.

Outside of the capitals, affordability improved everywhere except in Victoria.  Affordability has improved about 5% outside of the big smokes since late last year.  Big smokes, ha!

Let’s use Brisbane as an example.  It now takes 1.6 times the average full-time earnings to pay off the mortgage on the median priced dwelling in the Queensland capital.  It took over two full-time wage earners to afford to buy something in Brissie less than two years ago.

Today you need about $110,000 in combined income to buy, and the average monthly repayments are now under $3,000.

Outside of Sydney, where it still takes two full-time wage earners to afford to buy, housing across Australia is becoming more affordable.

Rents are rising, housing to buy is much more affordable.  Something has to give!

2. New forces

Yes, Europe is in the crapper, and China’s economy is likely to slow down, and Australia needs to do a hell of a lot more to future proof itself.

We must build more infrastructure, increase our overseas migration intake, work harder and maybe for less (i.e. improve our productivity), and reward effort via tax incentives and less (much less) welfare.

I have argued for some time that our resource base is actually doing us (given the way we are currently mishandling our economy) more harm than long-term good.

But regardless of this whinge, Australia is positioned as a major world source of energy.  It’s an analogy much akin to the Middle East’s dominance of the last half-century in oil and natural gas production.

Our highway to prosperity will see long-term demand and investment in our resources sector from rising long-term new forces in the world economy – China, India, Russia, Brazil, Malaysia, Indonesia and South Korea.

Whilst the headlines are full of “boom n’ bust”, these new forces are in it for the long haul.

And it’s not just demand we are seeing, but long-term investment as well.  These new forces are making long-term commitments with multi-billion-dollar investments in mines, rail infrastructure, export terminals and projects that have up to 40 year horizons.

We think “years”, these new forces think “generations”.

The benefits of the resources upturn will have far-reaching and major implications for Australia’s economy and the greatest impact will be seen in the resources states of Queensland and Western Australia, followed by New South Wales and South Australia.

Ten years ago Queensland’s resources sector employed 20,000 people.  Today it is 60,000, and if all major projects proceed, it will be about 100,000 within a few years.

3. Employment

Whilst the resource states are seeing big impacts on the property market in and around the resource towns themselves, the biggest outcomes are likely to be felt in Brisbane and other locations around the south-east corner of the state.

Likewise, significant impact on the property market will be felt in Perth, Newcastle, Sydney and Adelaide.

One of the key questions is where will the thousands of people who work on mining and resources projects actually live?  Well, the stats indicate that three out of five (57%) of Queensland resource sector employees are living in Brisbane or throughout South East Queensland’s major regional towns.

The ABS employment figures for the 12 months to June 2012 confirm that 21,700 new jobs were created in Queensland– 11,000 of those in Brisbane and 10,700 elsewhere.

Of the Brisbane component, there were 6,200 jobs created in the southern Brisbane suburbs and 6,500 in the Ipswich Corridor.

Many of these new jobs were aligned with the resource industry.   Similarly, ABS shows that 10,300 jobs were created at the southern end of the Gold Coast; 15,500 in the Bundaberg area, and 10,000 in the Darling Downs/Toowoomba area.

Now, don’t forget that the ABS records employment as at the place of residence, not where you actually work and also – if you are inclined to add up the numbers above – that some areas across the state actually lost jobs.

Matusik Pulse – capital growth

Last week’s Matusik Pulse poll has found that most investors (46%) think that the middle-ring suburbs are the best place for capital growth.

One quarter of our respondents nominated an inner city location as being best, with little interest in the outer suburbs.

There also appeared to be little interest in sea and green change locations, which isn’t surprising, but what is of some surprise is the lack of interest in investing in a mining town.

Large regional centres do, however, hold some appeal.

Over 300 investors replied to this Matusik Pulse poll with about half (51%) residing in Queensland; 22% from New South Wales; 20% from Victoria and 5% from overseas.

Our current poll “What is stopping new residential sales at present?” opened yesterday.   You have a week to participate – will take you ten seconds – and results will be out every Saturday morning.

Want more? Including charts?  Then don’t be shy click here.

Michael Matusik is the director of independent property advisory Matusik Property Insights.  Matusik has helped over 550 new residential developments come to fruition and writes the weekly Matusik Missive.  The Matusik Missive is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.

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Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


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