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Here comes the property market rebound

We’re into the last few months of the year and our property markets haven’t crashed like the overseas doomsayers and many in the blogosphere predicted. 

Yet they’re still out there – the property pessimists looking for a reason why our property markets will tumble. Only last week another overseas ‘expert’ claimed that property in Australia was significantly over-priced and likely to crash by up to 60 percent!

Are they right?

The property pessimists were wrong in 2008, 2009, 2010, last year and this year, so I guess some will push their “end of the world as we know it” predictions into 2013.

I doubt whether they will be right next year either, as there are a number of signs that our property markets have already bottomed.

RP Data’s Home Value Index covering Australia’s five big capital cities, shows that Australia’s housing market reached a trough in May this year and dwelling values rose 2.5% across the five cities since then.

RP Data’s Home Value Index

Some more good news

Last week’s Australian Bureau of Statistics housing finance approvals data showed that excluding refinancing, housing finance rose by 2.6% for the month and up 5.7% for the year. This means more people are getting set to buy properties.

Around the same time the International Monetary Fund reported that Australia is now the world’s 12th largest economy, steadily moving its way up the list.

It’s important to put this into perspective…our economy has become the envy of all developed nations and is bigger than that of many countries who with much larger populations than ours.

And in further good news Swiss Banking giant Credit Suisse reported that Australians have the highest a median net worth in the world – $217,559 per person. By the way…that’s almost 4 times the net worth of each person in the U.S.

What does this mean for property?

While in the short term property prices are influenced by a host of macro and micro economic factors, in the long term there are really only two major factors affecting property values:

1. Population growth (which pushes up demand) and

2. The wealth of the nation (our ability to afford higher priced property.)

What’s happening to our population?

The latest demographic update released by the ABS showed our population growing at 1.49% per annum, the highest rate of growth since 2009 and net overseas migration was at the highest level in two years, with just over 197,000 net overseas migrants arriving in Australia over the previous twelve months.

That’s 18% higher than what was recorded a year ago, highlighting how significantly Australia’s rate of net migration growth has turned around.

Add to this the fact that our economy is performing well and I don’t think that anyone would argue that as a nation Australia become wealthier over the next 15 years.

This means things are looking good for our property markets in the medium to long term.

So have our property markets turned the corner?

It seems so. The latest RPData figures for the September quarter show growth in Sydney (2.8%), Melbourne (3%), and Darwin (3.9 percent).

Adelaide has had 2 consecutive quarters of positive growth (1.2% for the September quarter). And Brisbane is finally showing growth (0.8% percent for the September quarter).

The Perth property market may be turning with a slight increase over the last month, but it is down 0.2% over the September quarter. Canberra continues its sideways trend, with just 0.1 percent growth for the September quarter and Hobart’s property market fell 1.8% over the last quarter.

Where to now for our property markets?

While we may have turned the corner, there are still some “interesting” times ahead.

Different markets – not just different state markets – but different classes of property – will perform differently.

I still see a significant oversupply in the inner-city apartment markets in Melbourne and Brisbane, which will keep a lid on prices and rents in those markets. And there is a substantial oversupply of new house sin Melbourne’s west and northern suburbs.

I can’t see the top end of the market (luxury homes) picking up till the business world and our share markets pick up; but there are definitely some suburbs in every state that are outperforming the averages.

These markets are being driven by owner occupiers getting into the market and strategic investors getting set for the next stage of the property cycle.

We’re not going to have another property boom any time soon.

We’ve entered the stabilization phase of the property cycle – that stage where more buyers enter the market soaking up the properties for sale, but as the numbers of buyers and sellers are roughly in equilibrium, property prices will remain flat or only move up slowly.

However this is a time of great opportunity, which is not always recognized by investors and home buyers.

You see…it’s still generally a buyers market where they can call the shots and set themselves up with good properties that will increase in value as the property inevitably moves on.

In conclusion:

As the cycle moves on, and it always does, the combination of population growth and increasing wealth will underpin the strong growth of capital city property values – as they have done for decades.

If you’re interested in securing your financial future through property investment, now may be a good time to buy property – I have always found it a good time to buy when many are still a little uncertain of what’s happening in the market.

I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is independent and unbiased.

If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney Brisbane and with our associates in Perth. Just click on this link to find out more and reserve your place.

Of course I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but as so much is happening in property nowadays I’ll keep you updated almost every day with a short post in my blog – just click here and subscribe to it – that’s a different subscription to my regular newsletter – it gives you my short daily updates.

 



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Here comes the property market rebound' have 12 comments

  1. Avatar for Property Update

    October 25, 2012 @ 7:18 pm Gail Brennan

    Thanks for this interesting article.
    I wonder what all of those who predicted the property markets are going to crash are going to say now.
    I know some genuinely believed it, but I also think many on the internet forums were just jealous of those of us who worked hard, saved invested and grew our wealth.
    Somehow they didn’t think it was fair.
    I’ve worked hard and sacrificed to be able to own a property portfolio and now its working for me

    Reply

  2. Avatar for Property Update

    October 26, 2012 @ 11:07 am Mike

    I’ve always wondered why this newsletter only EVER says positive things about the property market. The fact remains that a lot of people have burned in the last 12 – 18 months, and yet you don’t mention that. You mention softening, and easing, but the fact, the actual fact, is property has been a bad investment in many areas/sectors in the last year or 2/3 without getting into details. And what of the chronic housing shortage that seemed to underpin so many articles? This was found out to be fraudulent, and based on an ABS stat of people who were homeless, in caravan parks etc etc, and essentially a totally rubbish statistic, why have you not acknowledged this and corrected your statements? It would be nice to see a review of your blue skies attitude with the fact that so many people are under water, and that there actually is no housing shortage, considered. Thoughts?

    Reply

    • Avatar for Property Update

      October 26, 2012 @ 2:35 pm Michael Yardney

      Mike
      You are correct that lots of people have been unsuccessful in their property investment. Yes lot’s of people have lost money in property investment.
      If you’ve been following me you would know that I have ofetn said property investment may be simple, but it’s not easy.
      Fact is 50% of people who get into property investment sell up in the first 5 years, and of those who stay in the market, 90% don’t get past owning 2 properties.
      However over the same period of time, a group of strategic investors who followed a proven investment system made significant profits.
      Mike I’ve often warned of what not to buy…such as off the plan or new house and land packages, but can’t help it if some people get exceed buy the wrong properties.
      Over the long term property values have increased – if you buy the right type of property. That’s why I always recommend a financial buffer to buy you time.
      I’ve never suggested property values always go up.

      Reply

  3. Avatar for Property Update

    October 26, 2012 @ 1:15 pm Mark

    Hey Michael,

    I actually think the property market rebound actually started already… some 6 months ago!

    mark

    Reply

    • Avatar for Property Update

      October 26, 2012 @ 2:36 pm Michael Yardney

      Mark – you are correct – the market in some areas has already rebounded

      Reply

  4. Avatar for Property Update

    October 26, 2012 @ 4:24 pm Jamie

    Anyone who’s read Michael’s book’s know’s he’s an advocate of counter cyclical investing. Timing in the market is more important than time in the market. He talks about greed and fear driving property investment. It’s human nature to need positive news and certainty to encourage us to invest. But when you think about it, when this is happening, the market is already booming and what you are doing is paying for something potentially at it’s peak in the current property cycle. The “timing” to buy is when there is uncertainty. You manage your risk of at this point by studying the facts, historical median prices per suburb, historical sales etc and knowing where you are in the property cycle of the area you wish to invest in. Michael also heavily advocates capital growth as the primary purpose for investing and creating financial buffers (risk mitigation) to protect you through economic cycles. As such, if you have lost money and been forced to sell, it is guaranteed that, you either didn’t buy a true capital growth investment, or didn’t setup sufficient financial buffers.

    Finally, Michael talks about there being a delay between perception and reality in property markets. In other words, when the public perception is that markets have stabilised, they are actually already on the upturn. In my opinion, call it stabilisation phase but we are on the upturn now and the time to buy was yesterday but given you can’t change that, it’s now.

    If you put your time into studying data which is available for public consumption, throw away the sensational property magazines and work hard to make sound decisions and be prepared to add capital value to property through carefully planned and managed projects, you can and will succeed.

    If you don’t, you haven’t worked hard enough, you’ve just been speculating.

    Reply

  5. Avatar for Property Update

    October 28, 2012 @ 4:04 pm Stephen

    Hey michael, I do appreciate a polite and softly spoken person, but I do think you need the microphone a little closer. Have the sound up full and can only just hear you – provided no background noise at all.
    Do really appreciate your thoughts on property though. Have a good one.

    Reply

    • Avatar for Property Update

      October 28, 2012 @ 5:24 pm Michael Yardney

      Sorry Steven – I checked and the volume seems fine on my computer – even with my little hearing problem :)

      Reply

  6. Avatar for Property Update

    October 28, 2012 @ 8:20 pm James

    Hi Michael,
    Ive engaged Metropole buyers agency previously for a property purchase which has not moved up in value , but I know its just the Brisbane market and it will bear its fruit sooner rather than later.
    Ive also added more of my own choices into my portfolio and will be adding more soon , I think the timings quite good to get into property , especially around some of the Brisbane markets.

    Your thoughts on the Brisbane established unit market would be welcome , 5 -10 kms out from the CBD . Im not keen on the new high rise stuff as its filling the skies everywhere and must be getting close to being oversupplied for a long time to come.

    Reply

  7. Avatar for Property Update

    October 29, 2012 @ 4:14 pm Jacob

    Hi Michael,

    I may share the same thought as Mike’s said earlier (26th Oct 2012 at 11:07 am) wondering why this newsletter only EVER says positive things about the property market, apparently, Banks do not see it the same way, their fixed rate still below the current variable rate which may indicate that Banks still think that the worst still to come.

    Reply

  8. Avatar for Property Update

    February 20, 2013 @ 11:40 am Livia

    Hi Michael,

    I have found your comments very interesting.

    I have purchased a 2 bedroom unit in a complex of 11 in Yamba in 2009, only four kilometres from the best surfers beaches. The unit is already 25 years old, but in very good condition, about 180sq mt.
    I have bought it for $255.000 and last market appraisal stated it could be selling for $245.000? Do you know the area? Can you advise me or give me some ideas and share views on how the coastal market will perform in the next year or so?

    Many thanks
    Livia

    Reply


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