Latest property price forecasts revealed. What’s ahead in our housing markets in the next year or two?

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What’s the outlook for the Australian property markets for 2022 and beyond?

This is a common question people are asking now that our real estate markets are opening up from the Covid lockdowns.

Despite a sequence of fifteen State or Territory lockdowns so far this year, property prices have been largely unscathed.

And even though the rate of house price growth is slowing, and our regulator APRA is keen to see the housing markets slow down, property values keep rising in almost every market around the country and our capital cities are in line for strong double-digit property price growth this year.

Over the past year, Sydney house prices have risen over 24%, Melbourne 15% and Brisbane 20%.

But the momentum in growth is showing signs of easing, since peaking in March.

Now I know some potential buyers are asking “How long can this last? Will the property market crash in 2022?”

They must be listening to those perma bears who keep telling anyone who’s prepared to listen that the property markets are going to crash, but they’ve made the same predictions year after year and have been wrong in the past and will be wrong again this time.

What’s ahead for property values in 2022?

While property prices are notoriously difficult to forecast, in my mind property values will keep rising in 2022, but not everywhere and not to the same extent as they have over the last year.

While most property markets around Australia have performed strongly so far this cycle (other than the inner city of high-rise apartment market), moving forward the rate of property price growth will slow and there are several reasons for this including:

  • Affordability issues will constrain many buyers.
    The impetus of low interest rates allowing borrowers to pay more has worked its way through the system and with property values being 20- 30% higher than at the beginning of this cycle at a time when wages growth has been moderate at best and minimal in real terms for most Australians, this means that the average home buyer won’t have more money in their pocket to pay more for their home.
  • The pent-up demand is waning.
     While there are always people wanting to move house and many delayed their plans over the last few years because of Covid, there are only so many buyers and sellers out there and there will be fewer looking to buy in 2022.
  • APRA – is intent on slowing our markets using macroprudential controls

This will lead to a two-tier property market – in other words, not all locations will continue growing strongly moving forward.

I can see properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, significantly outperforming cheaper properties in the outer suburbs.

While the outer suburban and more affordable end of the markets have performed strongly so far, affordability is now becoming an issue as the locals have had minimum little wages growth of the time when property prices have boomed.

In these locations, the residents don’t have more money in their pay packet to pay the higher prices the properties are now achieving.

More than that, Covid19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.

And as we start to emerge from our Covid Cocoons there will be a flight to quality properties and an increased emphasis on liveability.

As their priorities change, some buyers will be willing to pay a little more for properties with “pandemic appeal” and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a “liveable” location will play a big part too.

Those who can afford it will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home.

They will look for things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs all within 20 minutes’ reach.

Here’s what the banks say

Recently all our 4 big banks have updated their property price forecasts in response to the market’s resilience in the face of extended lockdowns.

In its latest update, ANZ stated house price growth will slow over the next year to 6% after median house prices boomed 21.9% over the year to September.

The bank suggested that rising house prices will deter some home buyers, while APRA’s decision to ensure new borrowers can service a mortgage if interest rates jump 3% will put a brake on lending.

While we genuinely generally concur with ANZ’s forecast for 2022, we can’t see a good reason for house prices to fall in 2023 unless APRA intervenes and tightens the availability of credit.

Sure housing market growth will slow, the current levels of growth are unsustainable in the long term, but our improving economy and the opening of our international borders next year will underpin demand for housing.

Anz Forecasts

 

Here’s what’s been happening to Australian house prices over the last year…

Dwelling Values

Housing Inflation

Source: NAB, CoreLogic, December 6th 2021

So how long will this cycle continue?

Remember the current upturn phase of the property cycle only commenced in October 2020.

Normally the upturn stage of the property cycle lasts a number of years and is followed by a shorter boom phase which is eventually cut short by the RBA raising interest rates or by APRA introducing macroprudential controls to dampen the exuberance of property investors and home buyers.Apra

However, this time around we have experienced an unprecedented rate of growth seeing our property markets perform even more strongly than anyone ever expected, with the rates of house price growth at levels not seen for a number of decades.

While a lot has been said about the +20% increase in property values many locations have enjoyed so far this cycle, it must be remembered that the last peak for our property markets was in 2017 and in many locations housing prices remain stagnant over a subsequent couple of years and it was really only earlier this year that new highs were reached.

This means that average price growth was unexceptional over the long term, averaging out at around 4 percent per annum over the last 5 years

But our financial regulator APRA recently instructed banks and other authorised lenders that from November borrowers will need to be able to meet repayments at least 3 per cent higher than the loan product rate to receive a loan.

If, for example, you apply for a mortgage with an interest rate of 2.5 per cent, the bank must now assess that you will still be able to make repayments if the rate rises to 5.5 per cent – rather than the previous serviceability assumption of 5 per cent.

These changes mean the maximum borrowing capacity for the average borrower will reduce by around 5 per cent.

Interestingly the new 3 per cent buffer rate does not apply to non-bank lenders. However, APRA is considering including them in the future.

While tougher lending standards will certainly take some heat out of Australia’s property markets by restricting the number of people that can get home loans, or lessen the amount they can borrow, it seems like the regulators are aiming to gently apply the brakes to the housing market, rather than slam them on.

Now I know some people are worried and wondering “Are the Australian property markets going to crash in 2022?”

They hear the perpetual property pessimists who’ve been chasing headlines and telling everyone who’s prepared to listen that the Australian property markets are going to crash and housing values could drop up to 20% – but just look at the terrible track records – they’ve been predicting htis every year for the last decade and they’ve been wrong.

Our property markets are just going to move out of the sixth gear into third or fourth gear – they are not going into reverse.

Back to the question of when will this property cycle end – there is little doubt that Macro-Prudential controls will have a negative impact on our property markets and slow the rate of growth of housing values.

After all, that’s what they’re intended to do.

Whether the markets will just experience slower growth or stop dead in their tracks will depend on what measures are introduced.

Targeting debt to income ratios will have a limited impact on higher wealth households, who often have multiple streams of income.

However, it will affect lower-income households and those purchasing property for the first time.Scale

If you think about it, first home buyers don’t have a “trade-in” of a previous home and therefore need to borrow higher loan to value ratios.

On the one hand, the government says it wants to encourage first home buyers, and on the other hand, it is encouraging the regulators to sideline them.

So in the meantime, it’s just waiting and see what our regulators choose to do.

I hope they have learned from the results of previous interventions, otherwise, if history repeats itself, there will be some unintended consequences.

Watch this space.


NOW READ: Seven reasons for optimism about our economic recovery.


Yet despite all the challenges, our housing markets just keep bounding along…

Monthly Change Home Values

Source: Corelogic December 6th, 2021

What’s ahead for our property markets?

Let’s have a look at 6 property trends that I think will occur in 2022.
  1. Property demand from home buyers is going to continue to be strong

Currently, home prices are surging around Australia, auction clearance rates remain high, and the media keeps reminding us we’re in a property boom.

The result is emotions are running high at the moment, with FOMO (fear of missing out) being a common theme around Australia’s property markets.

One of the leading indicators I watch carefully is finance housing approvals, and these are suggesting that more Aussies are looking at getting into property and we will have strong ongoing demand from owner-occupiers and investors over the next 6 months.

Now, with borrowing costs lower than they ever have been, the reassurance from the RBA that interest rates won’t rise for a number of years, it is likely that buyer demand will remain strong throughout 2022.

In fact, this is a self-fulfilling prophecy…

As property values increase and the media reports more positively about our property markets, FOMO will mean more buyers will be keen to get in the market before it prices them out.

2. Investors will squeeze out first home buyers

While there were many first-time buyers (FHB’s) in the market in the first half of the year, buoyed by the many incentives being offered to them, now demand from FHB’s is fading and property investors re-enter the market and property values rise.

Of course over the last few years, investor lending has been low, but with historically low-interest rates and easing lending restrictions, investors are back with a vengeance.

Lending Investor By State

3. Property Prices will continue to rise

While many factors affect property values, the main drivers of property price growth are consumer confidence, low-interest rates, economic growth and a favourable supply and demand ratio.

trends rise house growth property marketAs always, there are multiple real estate markets around Australia, but in general property values should increase strongly throughout 2022.

However certain segments of the market will still continue to suffer, in particular in the city apartment towers and accommodation around universities until we get the influx of migrants and international students that the government is encouraged to return to Australia.

While overall vacancy rates are low in range to rising, some rental markets will remain challenged – in particular, the inner-city apartment markets which are reliant on students, tourists (AirBNB) and overseas arrivals.

But overall, Australia’s low mortgage rates continue to underpin very strong growth in property prices throughout the country.

House prices will rise further

Chart My 5

Ongoing strength in housing finance, elevated auction clearance rates, and continued low stock levels suggest housing prices will continue to rise solidly through 2021.

4. People will pay a premium to be in the right neighbourhood

If Coronavirus taught us anything, it was the importance of living in the right type of property in the right neighbourhood.

Australia SuburbsIn our new “Covid Normal” world, people will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home.

They will look for things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs all within 20 minutes reach.

Residents of these neighbourhoods have now come to appreciate the ability to be out and about on the street socialising, supporting local businesses, being involved with local schools, enjoying local parks.

5. More expensive properties will outperform

The current property cycle was initially characterised by all segments of the market rising – other than inner-city high-rise apartments.

But now the high end of the market is leading the growth in property values

According to Corelogic, the high tier is the top 25% of property values in any given region.

As of February, this refers to dwelling values at around $960,000 or higher for the combined capitals, with a typical value in the high tier around $1.2 million.

Over February, the top 25% of values in the combined capital cities jumped 2.7% in value. This was up from an increase of 0.5% in January.

The middle 50% of dwelling values (the mid-tier) increased 1.5%, and the ‘low’ end of property values (the low tier) increased 1.2%.

3 Monhts

 

6. This is a cycle dominated by upgraders

The current property and economic environment, plus the scars left on many of us after a year of Covid related lockdowns have meant that Aussies are looking to upgrade their lifestyle.

  1. Many tenants are no longer happy to live in small dingy apartments and with an oversupply of rental units available in many areas, they are taking the opportunity to upgrade their accommodation.
  2. Other tenants who have managed to save a deposit are taking advantage of many of the many incentives available and are becoming first home buyers.
  3. With record low-interest rates and surging property markets, many existing homeowners or upgrading their accommodation to larger homes in better neighbourhoods. In fact, a recent survey suggested that one in three homeowners are looking to sell their home in the next five years.
  4. While small group homeowners are upgrading their lifestyle and moving out of the big smoke to regional Australia, more Aussies are looking to upgrade their lifestyle by moving to a better neighbourhood. As mentioned above, they love the thought that most of the things needed for a good life are just around the corner.
  5. Many Baby Boomers are looking to upgrade their accommodation by moving out of their old, tired family home into large family-friendly apartments or townhouses. But they’re not looking for a sea change or tree change, they’re keen to live in “20-minute” neighbourhoods close to their family and friends.

What about the long term prospects for our property markets?

Currently, there are about 25.5 million Australians and in early 2021 the Government released the Intergenerational Report to help Australia and the businesses plan for the next 40 years –.

The IGR projects an Australian population of 38.8 million by 2060-61, and even though this is a little lower than previous projections – due to Covid slowing things down – this still means Australia’s population is projected to grow faster than most other developed countries.Population Growth

Despite the reduction of the projected population, these trends are truly monumental.

If you think about it, it’s taken Australia well over 200 years since European settlement to reach a population of 25.5 million people today.

But in the next 40 years, our population will increase by around 13.3 million people.

In other words, it will increase by over 50%!

To make this worse, currently, there are 2.5 people in each household, but the IGR forecasts the average number of people in each household will shrink a little moving forward, meaning we are going to require about a third more real estate than we currently have.

To deal with the projected population growth between now and 2061 it’s likely we’re going to require one new property built for every two properties that currently exists!

All this means our way of living is going to change considerably and town planners will struggle to cope with this growth.

Of course, this will impact property investment choices, but strategic, knowledgeable investors will be well-placed to capitalise on the changing trends.

What this means is there will be many more high-rise towers of apartments, not just in the CBD but in our middle-ring suburbs – we are already starting to see that particularly in Melbourne and Sydney. And there will be lots more medium-density housing – in particular townhouses will be a popular way to live with modern large accommodation on more compact blocks of land.

It would be foolish to try moving forward because no one really knows what’s going to happen to inflation and interest rates, but as more of us want to live in the large capital cities of Australia, and in particular in those locations close to the CBD or the water where there will be more manatees, the scarcity will only push up the price of properties.

What’s ahead for our economy?

Economic growth has predictably retreated over the September quarter, but the results were significantly better than the gloomy numbers that had been widely forecast.Recession Australia Note Money Economy Squeeze Tighten Save Saving Budget Cut 300x200

This certainly kills stone dead the prospects of another recession as was also predicted by many.

The ABS reports that the national GDP contracted 1.9% seasonally adjusted over the September quarter which particularly reflects the impact of the coronavirus lockdown is in NSW and Victoria.

State final demand contracted sharply over the September quarter in New South Wales by 6.5%, with Victoria down 1.4%, and Canberra falling 1.6%.

All other states, with the exception of Western Australia, reported strong economic growth over the quarter.

Gdp September

With lockdowns having ended in October, the prospect of a sharp rebound in economic activity is clearly likely over the December quarter with a sustained recovery set to continue over 2022.

Although challenges remain with the emergence of coronavirus variants, the Australian economy has again proven resilient with consumer confidence rising with the ending of coronavirus elimination policies through lengthy lockdowns.

Here are 8 reasons to feel positive about our economic future

  1. The Reserve Bank Governor has committed to leaving the cash rate at 0.1 per cent till 2024. .

Long term interest rates

2. While inflation has picked up, it remains low in underlying terms.

Inflation pressures are also less than they are in many other countries, not least because of the only modest wages growth in Australia.

And importantly, the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time.

The Board is prepared to be patient, with the central forecast being for underlying inflation to be no higher than 2½ per cent at the end of 2023 and for only a gradual increase in wages growth.

With inflation at best just in the mid-range target at the end of 2023 but wages growth to remain subdued by comparison, this continues to confirm that 2024 – at the earliest – remains the current RBA expectation for the next increase in official rates.

 

Inflation Forrcast

3. Unemployment is the focal point of all monetary and fiscal policy actions.

And despite the concerns of what could happen to unemployment with the removal of Job Keeper, Australia’s unemployment rate keeps falling.

Sure with the lockdown is in late 2021 unemployment took a hit, but new job ads on SEEK rose 10.2% in October.

This followed on from the strong 8.8% month on month rise in September.

Not surprisingly NSW, Victoria and the ACT drove the result with those jurisdictions coming out of lockdown in the month.

This suggests labour demand is strong and should see the unemployment rate resume its pre-lockdown downward trend (after a little lag.)

 

Unemployment Forecast

 

4. The Westpac consumer sentiment index is at decade highs while business confidence is at 31-month highs.

Compared to prior downturns, the recovery in consumer sentiment is the sharpest seen in the history of the series and reminds us of the unusual nature of this shock and the extensive government support provided to households and businesses.

Consumer confidence February 2021

5. The success in suppressing the virus has enabled our states and territories to ‘reopen’ their economies.

6. Governments, the Reserve Bank, commercial banks, and regulators have provided all the necessary support and stimulus to ensure as many businesses as possible stay in business and workers hold onto jobs.

7. Borrowing costs for businesses, households, and governments are at ‘rock bottom’.

8. The additional boost to confidence and future prospects comes from the prospect of a vaccine.

Risks to our economy include further waves of virus cases; setbacks with vaccines; policy mistakes on the removal of support measures; and an extended delay in the re-opening of foreign borders.

Compared to prior downturns, the recovery in consumer sentiment is the sharpest seen in the history of the series and reminds us of the unusual nature of this shock and the extensive government support provided to households and businesses.

We’re spending morecredit-card-consumer-buy-shop-confidence-economy

The major banks regularly report their internal data on credit card spending and consumer activity which has lifted strongly over the last few months in part due to the opening up of Victoria but consumer spending is also strong in other states.

Going forward, consumer spending faces headwinds from elevated unemployment, weak wages growth, tapering income support, and weak population growth.

The government recognises that consumer spending is a key driver of economic activity and that’s one of the reasons it is so keen to reduce unemployment and support our economy.

Property markets are booming

When Australians feel comfortable and confident about the value of their homes, their castle, they experience a wealth effect that encourages them to spend more.

The Stock Market is Rallying

Rising stock prices are important for several reasons – they show investors are confident in the earnings and profits of the business sector and they boost the wealth of shareholders which underpins confidence and spending.

A vaccine rollout is happening and boosting confidence

What about house prices?

Interestingly all the bank economists agree that it is likely that all our capital cities will experience strong house price growth over the next couple of years with house prices rising 20% to 30% over this property cycle.

Of course, there isn’t one Australian property market, or one Melbourne or Sydney property market so certain segments of the market will outperform.

In particular, the more affluent suburbs of our capital cities where residents have higher wages growth and more cash stashed away from the Covid pandemic are likely to outperform.

Imgpsh Mobile Save

Of course, at times like this, forecasting median house values are of little value.

Instead, one needs to get more granular to really understand what is really going on.

Each state is divided into multiple markets, by geography, price point and type of accommodation.

Each of our capital cities has an inner and near CBD property market, an inner suburban market, a group of middle-ring suburbs, and outer suburban property markets.Businessman And Statistics Trend

And then there are apartments – either high-rise or medium-density –  townhouses, villa units, and houses.

There are also new and establish property markets.

And each of these market segments behaves differently.

Currently, most of the property sales occurring are in the lowest price points with few discretionary sellers in the more established suburbs and higher bracket suburbs.

This means that the palette of properties currently being sold is generally in the lower price bracket and this alone will bring down reported median home values.

But this doesn’t accurately reflect the value of particular properties in any specific market, but more of the types of properties being sold.

We regularly report buyer demand as being shown by realestate.com.au’s Monthly Search Report and as you can see from the chart below, buyer demand is considerably higher than a year ago, even though this chart shows how enquiries have slowed down and we’ve moved from a “white-hot market” to a “red hot” market.

Median Days On Sight

Moving forward some areas will strongly outperform others

The coronavirus pandemic has forced all Australians to reevaluate how we live our lives.

Offices were shut, lockdowns were in place, and moving forward people are likely to continue working at home more than ever.

This means gone are the days where our ‘home’ was simply the place we rest our heads and enjoy some downtime between work and our social lives – the coronavirus social distancing has put an end to life as we once knew it.

If social distancing and the Covid-19 environment have taught us anything, it has taught us the importance of the neighbourhood we live in.

If you can leave your home and be within walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.

That’s why choosing the right neighbourhood is important for property investors?

In short, it’s all to do with capital growth, and we all know capital growth is critical for investment success, or just to create more stored wealth in the value of your home.

Sure there is always the opportunity to add value through renovating your property or making a quick buck when buying well.

But these are one off’s and won’t make a long-term difference if your property is not in the right location because you can’t change its location.

This is key because we know that 80% of a property’s performance is dependent on the location and its neighbourhood.

In fact, some locations have even outperformed others by 50-100% over the past decade.

And it’s likely that moving forward, thanks to the current environment, people will place a greater emphasis on neighbourhood and inner and middle-ring suburbs where more affluent occupants and tenants will be living.

These ‘liveable’ neighbourhoods with close amenities are where capital growth will outperform.

How do we identify these locations?

What makes some locations more desirable than others?

A lot has to do with the demographics – locations that are gentrifying and also locations that are lifestyle locations and destination locations that aspirational and affluent people want to live in will outperform.Neighbour

It’s well known that the rich do not like to travel and they are prepared to and can afford to pay for the privilege of living in lifestyle suburbs and locations with a high walk score– meaning they have easy access to everything they need.

So lifestyle and destination suburbs where there is a wide range of amenities with 20 minutes walk or drive are likely to outperform in the future.

At the same time, many of these suburbs will be undergoing gentrification  – these will be suburbs where incomes are growing, which therefore increase people’s ability to afford, and pay higher prices, for property.

A good neighbourhood means different things to different people, but there are some key factors that help to determine which locations have the potential to grow in value faster in the future.

Generally, a good neighbourhood is determined by the physical location, suburb character, and its close proximity to amenities such as a shopping strip, park, coffee shops, education, and even some jobs.

It’s obvious then that in our new ‘Covid’ world, people will want to be in a location where everything they need is in short 20-minute proximity – whether that is on public transport, bike ride or walks – to their home.

In planning circles, this concept is known as the ‘20-minute neighbourhood’.

Many inner suburbs of Australia’s capital cities and parts of their middle suburbs already meet the 20-minute neighbourhood tests, but very few outer suburbs do because there is a lower developmental density, less diversity in its community, and less access to public transport.

Supply and demand

Rising property prices are the result of two basic economic concepts: “Supply and Demand” and “Inflation”.

However, there is a sub-component of Demand, called “Capacity-to-Pay”, which is often overlooked.

Understanding how these concepts work together to affect real estate is crucial to one’s belief or doubt about whether real estate values will rise.

In a free-market economy, prices of any commodity will tend to drop when supply is high and demand is low.

In other words, when there is more than enough of something, it is said to be a buyer’s market because sellers must compete, typically by lowering the price, to attract a buyer.

Conversely, when supply is low and demand is high, prices will tend to rise as buyers bid up pricing to compete for the limited supply.  This is called a “seller’s market”.

Let’s look at it this way….

  • With regard to supply…. they aren’t making any more real estate in the most desirable areas and by this, I’m talking about the dirt, not the buildings.
  • With regards to demand, Australia has a business plan to increase of population to 40,000,000 people in the next 30 years. 

For the last few decades, continued strong population growth has been a key driver supporting our property markets.

Australia’s population was growing by around 360,000 people per annum, meaning we needed to build around 170 to 180,000 new dwellings each year to accommodate all the new households.

Since 60% of our growth is dependent on immigration, in the short-term population growth will fall, but they should increase again as soon as overseas immigrants will be allowed to come to our shores.

However, more and more ex-pats are returning to Australia.

At the same time, the number of new properties listed for sale in our capital cities is falling creating an imbalance of supply and demand

Time On Market

Vendor Discounting

Source: Corelogic December 6th, 2021

What about affordability?

With interest rates at historic lows, housing affordability is as cheap as it ever has been.

I’m not saying the properties are cheap – they never have been if you want to live in great locations in major world-class cities.

But for those first home buyers wanting to get a foot on the property ladder, or established home buyers wanting to upgrade, or investors looking to hold onto a property, the holding costs are less than they ever have been.

And the RBA has declared that the interest rate will not increase until unemployment is back to within its preferred range of around 4.5%.

They have said this will be unlikely to occur in the next three years.

In other words, we are in unprecedented times where we don’t have to worry about rising interest rates in the foreseeable future

Of course, rising property prices are an increasing issue for First Home Buyers who are not bringing a “trade-in” to the market.

As opposed to an established homebuyer who has a “trade-in” that is increasing in value, if first home buyers wait to get into the market they’re finding the market moving faster than they can save, so they’re hopping on board the property train as quickly as they can.

First home buyer affordability has declined for the second consecutive quarter according to Dr. Andrew Wilson, reinforcing the latest ABS data that revealed first home buyer numbers – although still strong – have fallen over recent months.

First Home Buyer

Australian house price forecasts

In the medium term, property values will be linked to the extent that our economic recovery affects income, employment, borrowing capacity, and credit availability.

However, I’m comfortable with the underlying long-term fundamentals supporting our property markets in the medium to long term.

Let’s look at a couple of them…

  • Population growth

As I said, in the short-term population growth will fall, but this should increase again now that the gates have been opened and over 200,000 overseas immigrants will be allowed to come to our shores.

Of course Australia is likely to be seen as one of the safe haven’s in the world moving forward.

  • Declining housing supply

The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.

Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.

  • Interest rates are low Vacancy

The prevailing low-interest-rate environment is making it easier to own a home, either as an owner-occupier or investor.

In fact, it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.

  • Smaller households are becoming the norm

Sure many people live in a multigenerational household, but pretty soon Millennials will make up one-third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.

More one and two people households mean that moving forward, we will need more dwellings for the same number of people.

  • More renters

Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.

The government isn’t providing accommodation for these people. That’s up to you and me as property investors.

  • Investors are back in the market with a vengeance.
  • The underlying economic fundamentals are strong 
  • And Australia’s banking system is strong, stable, and sound.

Even though a few home buyers have overcommitted themselves financially, there should be no real concern about household debt because, in general, it is in the hands of those who can afford it.

There is currently a very low rate of mortgage default of mortgage to increase.

Sydney House Price Forecast

Sydney

Sydney has once again recorded one of the largest rises in housing values over the month, but it’s also the city that has recorded the sharpest reduction in the pace of capital gains from earlier highs.

Sydney is the most expensive capital city by some margin and it’s also been the city where values have risen the most over the first seven months of the year.

Worsening affordability is likely a key contributing factor in the slowdown here, along with the negative impact on consumer sentiment as the city moves through an extended lockdown period.

Sydney house values are now up 25.2% over the past twelve months, while unit values are up less than half that rate.

With a 7.6% rise in values over the year.

In fact apartments in high supply areas such as the cookie-cutter high rise CBD towers present a significant risk to property investors.

This trend already occurred prior to COVID-19 where certain areas in Sydney experienced major unit oversupply.

It seems the property investors are slowly understanding the risks associated with high-rise tower apartments in Sydney including potential construction defects, high vacancy rates, lack of scarcity, lack of capital growth, and the challenges of buying in buildings that are predominantly owned by investors, and often many overseas investors.

Real estate in Sydney’s larger regional locations, and in particular in lifestyle locations like Byron Bay, the Central Coast, the Hunter Valley, Wollongong, New South Wales south coast should perform strongly this year with beachside suburbs likely to outperform the wider overall market

The resurgence of buyer and seller interest in the Sydney property market has meant that auction clearance rates have consistently been in the high 70% – 80% range suggesting there are more buyers than there are sellers and this always leads to higher property prices

More investors are getting into the Sydney market now recognising that there are no bargains to be found and that in 12 months time the properties they purchased today will look like a bargain.

Sure there are fewer good properties for sale at the moment, and many of the good ones are for sale off-market, however, if you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.

Sydney

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Melbourne House Price Forecast

Melbourne’s housing market has moved through another solid month of growth with housing values rising 0.8% over the month of September.

Melbourne housing prices are now at new record highs having increased 15.0% in the last year.

While the annual rate of growth is about the decade average, it’s the lowest annual increase across the capital cities.

The softer performance relative to other regions is due to a few different factors.

These include weaker unit market conditions where values are up by 5.9% over the year, weaker demographic trends as population growth is negatively impacted by closed international borders and stronger migration to the regional areas of the state and a more significant impact from COVID outbreaks and associated lockdowns.

At Metropole we’re finding that strategic investors and homebuyers looking to upgrade are actively out picking the eyes out of the market.

While overall Melbourne property values are likely to increase by double digits in 2021, like all our capital cities there is not one Melbourne property market, and A-grade homes and investment-grade properties are likely to exhibit strong double-digit capital growth.

Sure there are fewer good properties for sale at the moment, and many of the good ones are for sale off-market, however, if you’d like to know a bit more about how to find these investment gems give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.

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If you’d like to know a bit more about how to find investment grade properties in Melbourne please in the balance of this year give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.

Brisbane House Price Forecast

Brisbane’s house prices remained resilient over 2020 when other markets were impacted by the economic impact of COVID-19.

Now, moving forward, the Sunshine State will shine with strong demand for homes, particularly in lifestyle areas, likely to deliver double-digit capital growth over the next 12 months.

Brisbane house prices have increased 5.9% over the last quarter alone and are up 19.9% over the last year.

The rate of growth across the Brisbane housing market has held firmer relative to the larger capital cities.

Where there is some evidence that growth in housing values has slowed the reduction is nowhere near as sharp as Sydney or Melbourne.

Similar to most regions around the country, house values are rising at a faster pace than unit values with an annual growth rate of 17.7% for houses and 7.0% for units.

The outlook for Brisbane is looking more positive though, with a strong demographic trend fuelled by interstate migration, a large infrastructure budget, and a burgeoning level of excitement following the announcement that Brisbane would host the 2032 Olympic games.

Similarly, popular areas of the Gold Coast and Sunshine Coast have enjoyed strong demand considering the increased flexibility of being able to work from home and commuting to the big smoke less frequently.

At the same time, property investor activity has been strong, particularly for houses, not only coming from locals but from interstate investors who see strong upside in Brisbane property prices as well as favourable rental returns.

However, there is not one Queensland property market, nor one south-east Queensland property market, and different locations are performing differently and are likely to continue to do so.

Houses remain a firm favourite of prospective home hunters, with demand rising post-lockdown and it remains significantly elevated compared to last year.

However, apartment demand has been sliding and, in general, apartments in Queensland are a higher risk investment than houses, particularly due to a high supply of apartments that are unsuitable for families or owner-occupiers.

In summary…

Brisbane is likely to be one of the best performing property markets over the next few years, but while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long-term investments, certain submarkets should be avoided like the plague.


Now read: Brisbane property markets forecast for string growth

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Our Metropole Brisbane team has noticed a significant increase in local consumer confidence with many more homebuyers and investors showing interest in a property.

At the same time we are getting more enquiries from interstate investors there we have for many, many years.

If you’d like to know a bit more about how to find investment grade properties in Brisbane please give the Metropole Brisbane team a call on 1300 METROPOLE or click here and leave your details.

Canberra House Price Forecasts

Canberra’s property market has been a “quiet achiever” with median house prices recording the biggest jump in prices across all of Australia’s capital cities, at a huge 24.4% in just one year or 6.9% over the quarter, to a new median of $1.015 million according to Domain’s House Price Report.

That means that prices soared by almost $1,054 a day over the June quarter to give a total rise of $96,000.

This is the steepest price acceleration in almost three decades, the Domain report explained.

Median house prices in the inner north, inner south, and Woden Valley are now all above seven digits.

But unit price growth has been more restrained as the development boom of recent years contains prices, although they are edging closer to a record high, up a more modest $18,000 (or 3.6%) over the June quarter to $504,217.

Interestingly, since the pandemic, Canberra house prices have risen a huge 30.9% and unit prices 9.4%, which is the highest rate of growth across all of Australia’s cities.

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Perth House Price Forecast

The Perth housing market continues to record a rise in values although the pace of growth has slowed.

In line with rising home values, the annual number of dwelling sales across the Perth market has reached the highest level since 2006, with approximately 49,500 houses and units sold over the year.

At the same time, the number of listings across the Perth region has trended lower, tracking roughly 26% below the five-year average at the end of July.

Rental markets are amongst the tightest of any capital with house rents up 16.4% over the year.

With housing values rising, strong rental conditions, and high rental yields along with improving demographic and economic conditions, it’s likely the Perth housing market will become increasingly more attractive to investors.

But this does not mean that investors should jump into the Perth property market – there are better opportunities in other parts of Australia.

The problem is the Western Australian economy is too dependent on one industry – the mining industry and much of this is dependant on China.

Without structural changes to the W.A. economy, it is unlikely to be able to deliver the significant number of higher-paying jobs and the substantial increase in population growth required to keep driving strong housing price growth in the medium to long term.

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Hobart House Price Forecast

Hobart was the darling of speculative property investors and the best performing property market in 2017-8, and while dwelling values reached a record high in February 2020, its boom was interrupted by Covid-19.

Hobart property values are moving up again with values up to new record levels of 26.8% over the past year.

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Adelaide House Price Forecast

Adelaide housing values were up 2.0% in September taking the annual growth rate to 20.1%, the highest level since the Global Financial Crisis.

Housing demand has surged across Adelaide with the number of home sales over the past year the highest since 2002.

With demand at the highest level in almost two decades, advertised supply levels are around record lows.

Active listings numbers were around 34% below the five-year average at the end of July, demonstrating a severe shortage of available supply that is keeping upward pressure on housing prices.

Across the sub-regions of Adelaide, the pace of annual capital gains ranges from a 26.8% lift in values across Burnside through to a 3.4% rise across the inner-city precinct.

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Now is the time to take advantage of the opportunities the current property markets are offering.

Metrople Team

Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.

You can trust the team at Metropole to provide you with direction, guidance, and results.

Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi-award-winning team at Metropole.

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $4Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.

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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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'Latest property price forecasts revealed. What’s ahead in our housing markets in the next year or two?' have 98 comments

    Avatar for Michael Yardney

    December 7, 2021 Travis

    Hi Michael, long-time reader, first time poster. I have learnt so much from your content – thank you. We are looking to purchase our first investment property and want to make sure we make a good decision. I have spent a long time researching, upskilling and learning about your strategy. Our plans have changed multiple times over the past 6 months but I believe we have finally landed on the right approach. However the current market will make it difficult to purchase an investment grade property (house) in an excellent Brisbane location within our budget of $750-800k without significantly affecting our cash flow. I don’t want to accept a lesser location to purchase a cheaper property which will not perform as well over time. My hope is to build a significant portfolio over the next 30 years without selling properties unless necessary. Are you able to offer any advice? Thank you.

    Reply

      December 7, 2021 Michael Yardney

      I really don’t like giving personal advice in this public forum, so I have just sent you a personal email and I’ll be happy to answer some of your questions that way

      Reply

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    December 2, 2021 andrerw black

    yes, what on earth are you smoking, CAN I PLEASE HAVE SOME??……….but they’ve made the same predictions year after year and have been wrong in the past and will be wrong again this time. THIS COMMENT ALONE CONFIRMS YOU ARE NO MORE THAN 15 YEARS OLD AND DONT REMEMBER THE PAST! – -YOU TALK ABOUT HOUSE PRICES – -I BUY AND SELL THEM ON BEHALF OF MY CLIENTS, ONLY ONE OF US IS IN THE REAL WORLD

    Reply

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    September 10, 2021 Vanessa

    Hi Michael,
    My fiance and I have been looking to buy our first home in South East Melbourne, we have been looking around Cranbourne, Junction Village, Botanic Ridge, Clyde areas mainly. Our budget is up to $800,000 but if possible we wouldn’t like closer to $700,000. There are house and land in Junction Village for $700,000 with 400m2, I feel this is too much for the area but in the current market I am lost as to how to proceed. Developers are increasing prices every time we enquire, builders increase every time as well. We had no luck making offers in established market at top end of asking price. Are you able to give us any advice on what would be our best option? I think if we pay too much and look to trade up later when the market settles we will lose money.

    Reply

      September 10, 2021 Michael Yardney

      yes Vanessa – the market is very hot in the area you’re talking about and you won’t find a bargain. You are right that the block sizes are very small and prices are high, but I can’t see them dropping for some time, however in these locations prices do fluctuate when the market slows down as opposed to establish suburbs which tend to be more stable

      Reply

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    August 17, 2021 John

    Hi Michael,
    A regular follower of your blog here. Extremely useful content for property investors.
    I’m in Canberra and there are many “outer-ring” new developments in Canberra recently: Taylor, Ginninderry, Jacka, etc. Each of these suburbs has its own small local market hub. A lot of new houses and land are released in these suburbs. However, Canberra is quite different from other big cities in the way that everywhere in Canberra is within 5-10 minutes of driving to a major regional shop (Westfield, for example), and 15-20 minutes of driving to CBD. The distance between outer new suburbs to CBD is only 15kms and to a major local center (Westfield, for example) mostly within 5-10kms. Is it still considered an “inner-suburb”, and a good location, by your definition? Some definitions about good locations may work differently for Canberra, which itself is very small already. They get me confused. Thanks for your opinion!

    Reply

      August 17, 2021 Michael Yardney

      John, thanks for the kind words about our content. Yes Canberra is a very different market and therefore 15 kilometres from the centre is very different to 15 km from the centre of Sydney, isn’t it?
      Being in the right neighbourhood, more affluent and gentrifying neighbourhoods will be very important moving forward in Canberra

      Reply

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    August 6, 2021 Hetty

    Hi Michael
    I have a town house in Murrumba Downs Qlk.
    Do you think the town house values will go up or down in the next few years please?
    Should I sell now, or wait a bit longer?
    Thanks
    Hetty

    Reply

      August 8, 2021 Michael Yardney

      Hetty
      I can’t answer this question without knowing where in the suburb your property is, how old it is, what your plans are – is it your home or investment – are youable to use your funds elsewhere (can you get finannce?)
      THis is a really important decision. -maybe you should chat with my Brisbane team at Metropole

      Reply

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    August 3, 2021 Lloyd Smith

    There’s more to Australia than just capital cities. A proper analysis of Australian real estate should include trends in regional areas as well. I live in Cairns and suspect that there will be a large migration of people from big cities to provincial centers as lockdown fatigue sets in.

    Reply

      August 3, 2021 Michael Yardney

      Yes people live everywhere, but my aim is to outperform the averages and that’s why concentrate on locations where there will be stronger than average economic growth, which will lead to better than average wages growth, which will lead to more population growth from people who have higher than average income and can afford to and are prepared to pay more to live in these locations

      Reply

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    July 24, 2021 Chris

    HI Michael have been a long time listener to your podcast and have enjoyed your calming approach to ìnvesting. 7 years ago I started investing in Moss Vale Nsw as I saw it as a gentrifying suburb surrounded by far more expensive suburbs. It has done very well but I think there is more upside to go, being a median house price of 800k with its neighbours well over 1.3mil now. What are your thoughts on the area?

    Reply

      July 24, 2021 Michael Yardney

      Thanks for the kind words about my podcast and my approach Chris.
      I always find it interesting when people ask me about an area where they have already own a property – what do you expect me to say?
      If you been following me for so long, you’d know that Moss Vale doesn’t fit in with my investment strategy. It’s definitely not on my radar, however I can understand the attraction for some people living there or vacationing there.
      Currently a rising tide is lifting all the ships and like every other suburb, you’ll be some locations that are better than others in those suburbs and some properties in certain locations that will perform better than others.
      I can’t really tell you this is the right location where you should own a property without knowing your budget, your borrowing capacity, how much you earn, your cash flow situation, your end goals, your risk profile, and a whole lot of other factors.
      All these must be taken into consideration and not a location or a property in isolation. I’m really sorry that this won’t be the answer you’re looking for, but I’m being honest with you

      Reply

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    February 5, 2021 Philip Tomazin

    Hi Michael, I am looking to be a first time investor in my Perth market. Around $500,000.
    Can you suggest any suburbs that should attract strong capital growth in the future?
    Thank you

    Reply

      February 5, 2021 Michael Yardney

      While Perth is likely to have a strong property price growth in the short term, your budget will be reasonably restrictive, and before I would even recommend the suburb, I first must understand what your intentions are, what your timeframe is, what your cash flow situation is and your risk profile etc, etc then I would help you put a strategic plan together and only after you have a plan to become the person you want to become would we start looking at properties. Property investment is a process, not an event, and the reason most investors fail, and 50% are first time investors sell up in the first five years is because they don’t have a plan. You can read more about strategic property plans here

      Reply

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    January 18, 2021 Kat

    Hi Michael, really interesting article with lots of resources to back it up. I have recently committed to a property based in Cobbity that seems supported by the general guidance in your article but contrary to your thoughts to another poster specific to the area prospects. Can you please DM me so I can provide my specific goals and circumstances, for your thoughts? While no one has a crystal ball, it doesn’t hurt to get views on both sides of the argument coin. Thanks.

    Reply

      January 18, 2021 Michael Yardney

      Kat – sorry Cobbity is NOT in any way supported by the commentary in this article – it is definitely NOT on my radar.
      But if you’ve already committed, you don’t really want my thoughts do you?
      I genuinely wish you all the best with your investment

      Reply

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    January 3, 2021 Kim

    Hi Michael,
    I was thinking about buying in Newcastles East End development as an investment property. Would love to know your thoughts.

    Reply

      January 4, 2021 Michael Yardney

      May I please be blunt … many invetsors start by finding a property they like and then work backwards looking for data confirming their (often emotional) decision.

      That’s the wrong way round and that’s why I can’t answer your question. We need to start with your goals, your plans, your strategy, your finance capacity, your time frame and your risk profile amongst many other factors and only then can we start looking at properties that would help you achive your goals

      Reply

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    December 4, 2020 Alison Duffy

    What a perfect analysis Michael. I wish more people would do this to be honest. I fully agree with most of the statements made and I do not really understand why people are so negative in general about the state of the Australian real estate market. It seems the media keeps talking about how demand will go down, over and over again, when in truth, all of us working in real estate know that these things vary. There are always regions that are more popular than others and this can change so fast. Renting though will always be popular. I should say, more and more popular.

    Reply

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    December 3, 2020 Adam

    Hi Michael, I would really like your opinion on investing in the outer Sydney western suburbs, Cobbity for example. I am considering building a new home with higher end finishes/design in a new development with a reputable builder. Will these areas see home prices surge beyond the $1million mark in the next 5-10 years? All reports suggest that the area will see population growth of 1million plus by 2030 and the airport completion by 2026. Is it a good opportunity as a first time home buyer to get into a house and then sell out of the suburbs 10 years down the track once the area matures? Thanks, really appreciate the article.

    Reply

      December 4, 2020 Michael Yardney

      Adam – the answer is very simple – while there will be substantial population growth, those locations will continue to underperform in the long term.
      your budget allows you to buy in a much, much better location

      Reply

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    November 30, 2020 JAGBIR SINGH

    Hi Michael,
    Thanks or replying.
    My strategy is +gearing with steady growth, budget $600k

    Reply

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    November 30, 2020 JAGBIR SINGH

    Thanks Michael,
    First timer, thanks for sharing your knowledge.
    I would like to invest in Canberra in quality apartments by thinking its limited land in Canberra and steady population growth. Whats your thought on this.
    Regards
    Jagbir

    Reply

      November 30, 2020 Michael Yardney

      Before I answer that I must know a bot more about you – what’s your investment strategy and what’s your budget?

      Reply

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    November 23, 2020 nick

    best way to get wealthy is to have no children

    Reply

      November 23, 2020 Michael Yardney

      Nick, in my blended family I have six children and 10 grandchildren and I am very wealthy. I’m not talking about my property or material wealth but the fact that I have such a lovely family.

      Reply

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    November 20, 2020 Rashmikant Thakrar

    It is difficult to forecast anything. After lock down effect to economy, job market and housing market always going to look really good. Simple fact those business now open up and people who were waiting for those items and going out for coffee will start in numbers and novelty dies down. Same thing people were in the midst of moving or buying were on hold so all back dated transactions in the short term will look good. I am not saying property will crash and we will still be in a recession. The short term upward trend will have a dip after people start to get to normal.

    Reply

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    November 15, 2020 TSJ

    Hi Michael,
    As a regular reader of your articles who happens to now be based in Tasmania. I find that many of your observations or predictions about the southernmost state are biased heavily – and often almost entirely incorrect. I see that you have explained this bias in previous responses to people’s complaints like mine, however, you have done nothing to correct this from happening repeatedly.
    The fact is, that despite predictions to the contrary, Tasmanian property markets are continuing to do extremely well, with new record prices being regularly achieved, even despite – and perhaps even because of – border closures and COVID-19. The rising prices here are no longer as appealing as the initial reason for the housing boom, yet people continue to drive those prices higher. The reason for its appeal has little to do with the availability (or not) of big city jobs, or other economic indicators. Like other mainland regional locations that are desirable lifestyle locations, Tasmania is simply a wonderful place to live. I have lived in many places including Canberra, Brisbane and London UK, in good suburbs and quality housing and Tasmania is by far the most enjoyable place I have lived. (I have lived in both Launceston and Hobart). Even at the lower end of the housing price spectrum, property owners can expect to experience some unexpected lifestyle benefits, like a stunning view or private outlook (if you don’t have one where you live in Tasmania, you are in the minority of home owners). It is a very scenic place to live.
    With WFH opportunities increasing and a proactive business focussed state government down here, job opportunities will only grow over time, as they have been steadily doing for many years in recent times. But even if they didn’t, people would still choose to come here in droves, because the people who don’t need standard employment options or who are self-employed or can work from anywhere, or are tradespeople (in very high demand down here) or medical or education professionals (also both in demand, will be unaffected by local jobs or a lack thereof and the lifestyle benefits here are great.
    Who wouldn’t trade their small 2 bedroom renovator in inner city Melbourne or Sydney
    And one of the truisms of property markets is perpetual here – high demand with scarce supply. Whilst that simple equation exists, and with the affordability and relative value compared to the mainland, and the desirable lifestyle and now WFH on offer and low interest rates and COVID-19 lockdown fatigue, the conditions are ripe for the upward trend in pricing to continue for some time to come. Plus TAS economy has twice been voted the top performing one in the country and continues to defy the odds of what are usually reliable predictors.

    Reply

      November 15, 2020 Michael Yardney

      You are right the Tasmania and in particular the Hobart property market has performed extremely well over the last five years.
      I prefer to invest in the large capital cities where the economies are larger and therefore less volatile and where there are multiple growth drivers. The size of the Hobart market is such the small influences in either direction can significantly influence property values

      Reply

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    October 7, 2020 Flo

    Reading your thoughts made me quite stressed and upset as I bought into Green Sq about 4 years ago now. 100 meters to a station, 2 stops to the airport and one to Central and a solid build of four levels high, I was happy with my purchase. I’m not really wanting to take on a mortgage right now as an owner occupier ( I own it outright) and prefer to invest elsewhere or dump extra funds into Super. But fear has gripped me, that I’ve made a horrid mistake. I understand that over the next few years the prices will fall somewhat but I’m hoping that will level out eventually with borders reopening. If it’s wiser to sell now and buy somewhere in outer Sydney, in the next year, than I might consider it but it feels like a knee jerk reaction from the doom and gloom of what I’ve read here. But I’m open to your thoughts.

    Reply

      October 7, 2020 Michael Yardney

      Flo – sorry I did not intend to scare you. And I can’t give you personal financial advice over the Internet. However if this is your home and you have no debt, it really doesn’t matter what’s happening to the market around you does it?

      Reply

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    September 12, 2020 SAM

    Hello Michael,
    Would you please give me your idea about ” MOE – VIC 3825″ ?
    Why people don’t like to invest there ?
    Thank you in advance.

    Reply

      September 12, 2020 Michael Yardney

      Sam with a population of less than 9,000 people and no real reasons for a significant population growth and no real other growth drivers I can understand why investors don’t have Moe on their radar

      Reply

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    September 9, 2020 Jeffrey Osborne

    Hi Michael. Thanks so much for all the valuable information that you share. I own a small property business myself in Western Sydney and we aspire to be like your company in the efforts and the lengths you go to in order to help people feel more confident about their future. Particularly in these difficult times. Thank you.

    Reply

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    August 26, 2020 nat

    Hi Michael
    Just after some advice. I just bought some land on the mid north coast NSW. I want to start build this yr for a duplex but worried if property prices. Will this include cost of building, like should I wait to lock in to build contract till next year incase price to build drops?
    Many thanks nat

    Reply

      August 26, 2020 Michael Yardney

      Nat, there are many factors to take into account including your holding costs, what your intention is – buy and hold or on sell, supply and demand in the area, builders margins etc.
      I really can’t give you advice like this over the Internet – it would be very wrong to do so

      Reply

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    August 19, 2020 Property002

    Dear sir,
    Thank you for sharing your experience with us.

    Reply

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    August 19, 2020 Drew Riley

    The Gold Coast market seems to be booming at the moment due to low stock and out of state buyers looking for a change in lifestyle. Many homes are being bought by out of state residents without them even seeing the property. Do you expect property prices to continue to rise as more people begin working from home and looking for more affordable, lifestyle residences?
    Thanks Michael.

    Reply

      August 19, 2020 Michael Yardney

      Drew. I’ve always enjoyed my annual vacation to the Gold Coast and have seen it mature over the last 50 years.
      And yes, property values will continue to increase, but unfortunately it is a much more volatile market than Brisbane, so I’ve always avoided investing there.
      And I’m happy I have – it’s still not on my radar

      Reply

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        August 20, 2020 Drew Riley

        Thanks Michael! I think it’s epic you take the time to reply to everyone. I just bought a house on the canals in palm beach, gold coast which also close to the beach and the proposed light rail that will run from Surfers Paradise to the airport. Do you think buying properties that are limited (low residential density and there aren’t many properties on the canal) is an effective strategy when investing?
        Also I read that experts are forecasting the Gold Coast’s population is expected to grow to 1 million by 2021. How much of an effect does population growth have on property prices?
        Thank you so much Michael! Any wisdom you could pass on would be much appreciated.

        Reply

          August 21, 2020 Michael Yardney

          Drew -I don’t = answer specific questions about specific properties.
          As you can imagine a lot of people by their properties first, then ask me for advice confirming that they’ve made a good decision.
          However it sounds like the type of property you bought on the Gold Coast is likely to be one that outperforms the area in general.
          Population growth is important, but more important is supply and demand. Population growth in areas with a substantial supply of vacant land or the ability to create new land does not create necessarily create capital growth. Similarly lots of new development doesn’t create capital growth – supply is the enemy of capital growth

          Reply

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            August 21, 2020 Drew Riley

            Thanks mate! You’re an absolute legend. I’m a big fan of your work and appreciate the time you’ve given to respond. All the best to you and your family!

    Avatar for Michael Yardney

    May 21, 2020 Dee

    Would love to know your opinion on regional NSW , port macquarie area ?

    Reply

      May 21, 2020 Michael Yardney

      Are you looking to live there or as an investment location.

      If it is for investment, I would avoid regional Australia for many reasons as discussed in many blogs on this site. Why fight the big trends of multiple pillars of economic growth and population growth – I would stick to the capital cities

      Reply

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        May 25, 2020 James

        Hi Michael,

        Thank you for this very detailed article and for responding to the commenter above. I was looking into investing in the central coast but starting to think that might not be wise. I currently live in Sydney’s Northern beaches (its own micro-climate of a property market) and now thinking a unit in Newport or Dee Why would be the way to go. Can I get your 2 cents on that? Will also reach out to your company….

        Reply

          May 25, 2020 Michael Yardney

          Interesting James – neither of these suburbs are on my radar.

          I can’t give you advice over the internet of course, I don’t know your circumstances, your budget, your timeframes or your risk profile. However please do reach out to my team at Metropole and would be happy to give you strategic advice

          Reply

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    January 15, 2020 Nathan Brown

    Dear Michael, Most property reports tend to miss outer-west Sydney. How are things looking for Penrith? You say off-plan is still falling? We bought off-plan (at least in the more ‘prestige’ area the Penrith)price fixed in late 2015 (but settled in late 2018) so at least hope the price went up before dropping. Perhaps it’s now worth what we paid for it? Could we expect any growth in say 5 years?

    Reply

      January 15, 2020 Michael Yardney

      Nathan – sorry to hear you bought an apartment in Penrith – it’s an area that is likely to underperform over the next few years as it’s an area where the locals will have minimal wages growth.
      As for an increase in value in your apartment, it really depends in which block you bought and how much you (over)paid.
      Sorry – I don’t mean to be negative, I’m very positive for many parts of Sydney but not those outer suburbs

      Reply

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        January 16, 2020 Nathan Brown

        Thanks Michael. To be precise it’s in the Thornton area, right next to the train station. Not sure if it qualifies as the same kind of ‘high rise’ as Sydneysiders are worried about. Paid about $600k in 2015, come settlement date in 2018 they were re-selling for $650k, so I assume the price falls are to be taken from this peak? Tricky to work out but hope it may be holding its 2015 value.

        Is the Western Sydney airport likely to have a positive effect on the outer suburbs? Happy to keep it longer term and would even move into it upon return from UK. Your reputation spreads far and wide! Thanks again, Nathan.

        Reply

          January 16, 2020 Michael Yardney

          Nathan – I’m pleased that your property held its value at settlement. Having said that values out there have fallen a little since.

          Please read this article for some of my thoughts

          I’m not trying to be alarmist, but I know many other industry professionals feel the same.

          Reply

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            January 16, 2020 by Nathan

            Thank you, very interesting article. The units actually had INCREASED by up to 10% at settlement which gives some hope. Rental yield is currently 4.5% p.a.

            Finally, is the Western Sydney Airport positive news for property values in the greater west/Penrith when it opens?

            January 16, 2020 Michael Yardney

            Nathan. There are too many unknowns regarding the proposed airport to make any suggestions

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    January 9, 2020 Jon

    Thank you Michael, and in terms of the established apartment markets in Sydney, is there a certain number of levels you would not go near? For example is a unit complex with 20 units something that’s acceptable from an investment point of view?

    Reply

      January 9, 2020 Michael Yardney

      Jon, remember most areas in Sydney are not what I’d call “investment grade” locations for example our research has identified less than 30 suburbs that we are prepared to invest in, then within those suburbs less than 5% of properties are investment grade. I don’t want to mislead you with hard and fast rules – are you currently looking to invest? What is your budget?

      Reply

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        January 10, 2020 Jon

        Hi Michael it would be for a first home, preferably somewhere between the $700-$800k range.

        Reply

          January 10, 2020 Michael Yardney

          Your first home won’t be your forever home, but if you get it right it will be your steeping stone to building a portfolio of properties.
          Get it wrong and it will be a mill stone around your neck.
          Why not let my team at Metropole help you?

          Reply

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    January 9, 2020 Jon

    Hi Michael,

    Thank you for your very detailed article. I specifically wanted to ask in regards to the following comment in your article:

    “Sydney is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west at a significant discount to what they would have paid a few years ago and the prospect of the market moving forward over the next few years.”

    Is this alluding to steering away from high rise apartments in general? I was wondering in your reference to established apartments whether this meant the smaller apartment complexes in general.

    Thank you.

    Reply

      January 9, 2020 Michael Yardney

      You’re right it both cases Jon
      Steer away for the new and off the plan complexes – many will become the slums of the future as they are tainted with all the structural issues. Others are steering clear, banks are scared, insurers are scared – many naive investors will lose oney in these over the next decade

      Reply

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    January 6, 2020 Peter Evering

    Dear Michael nice article!

    According to Zillow the U.S. housing market – despite a record bull market over the past decade – could enter a recession in 2020. What do you think?

    Reply

      January 7, 2020 Michael Yardney

      Sorry I don’t follow the US property market. It’s hard enough to keep up with theAustralian market

      Reply

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    November 20, 2019 AJ

    haha.. its really from a future. the date of article is 4th December 2019. really ?

    Reply

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    August 20, 2019 Bernadette

    Predicting the property market is just that! a Predication. I attended a real estate seminar 1 year before GFC and some guy asked the question, What happens if the banks fail! The experts on the panel “laughed” … the rest of the story has been told!

    Reply

      August 20, 2019 Michael Yardney

      Bernadette – you’re correct – the main use of property forecasters is to make meteorologists look good 🙂
      But it’s still importnnat to understand the fundamentals at play and how things could pan out

      Reply

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    July 15, 2019 David Spar

    Haha. Predict all you want. Stats and all. My advice…just make sure your cashflow is in check, don’t rely on one income, have buffers in place and weather the storm. Everyone is accountable for their own actions and the circumstances you are in are a result of your choices. Whether that be because you planned ahead or you didn’t, and now realise that you can’t make the right moves when opportunity arises. Those who have structured their portfolios and lives correctly will see good and bad times as a win-win. And, if you want to continue furthering your education and invest in yourself… Get onto Grant Cardone. Study those who are the most successful in their field. Good luck to all, otherwise.

    Reply

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    May 18, 2019 Nathan

    Hey can you please do my economics assignment

    Reply

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    January 31, 2019 Financial Gladiator

    Interesting read and I’m glad I came across your very optimistic post and more importantly blog overall. Allow me to share a slightly more pessimistic view. I personally believe that it is still cheaper to rent than own in Australia in case of apartments if you calculated the holistic cost of owning and inflation. In my non expert view prices have to drop another 20ish % over the coming two years in Sydney and Melbourne. Why?
    1) China (Australia’s biggest trading partner) and the US (third biggest trading partner) will likely go into recession within the next 12 months.
    2) Australian government and the RBA changed legislation and interest rates respectively to allow large flows of foreign capital (mostly Chinese) to artificially inflate Australian prices unsustainably.
    3) Housing ownership fell drastically from about 70% to below 65% since the Global Financial Crisis (GFC) in 2007/2008
    4) Australia made it to a top ranking globally amongst all countries regarding the “household debt by GDP” (almost 123%)
    5) Property prices increased over 100% in Sydney and Melbourne since the GFC, far outpacing the growth of average wages.
    6) Chinese government has severely restricted Chinese capital to leave the country in 2017. And Chinese investors (together with speculative investors) were largely responsible for the inflation of the Australian housing market.
    7) While 2018 showed a large amount of Interest Only (IO) expiring, 2019 will have the highest number mortgages that will need to be renewed. The recent change of heart of APRA to loosing restrictions on banks regarding IO lending will only slow down the correction.
    8) Investor and PPOR homebuyer confidence is at an all time low and awareness of the perils of overleveraging and interest only rates is at an all time high.
    9) With net rental yields at an all time low (3%) in capital cities thanks to high levels of taxations (some of the highest in the World) falling average rents will force some investors to sell part of all of their investment properties. If rental yields equal inflation of 2.7% you made no money at all while bearing all the risk and work associated with owning an investment property.
    10) Affordability is a key concern for me: If the median income in say Melbourne is 80,610$ per annum, taxes and super takes shaves off some 23,409$ from the get go, average living expenses for a single person per year are 21,840$, and average rent expenses are in the ballpark of 18,040$ it would still take just shy of 10 years to save up for a deposit for an average house of 833,321$ (2018 Dec prices). All the meanwhile the person cannot fall sick, can’t take significant time off, can’t have children, have to live a pretty modest life and save nothing else but for the deposit. If the person has a partner they could probably make it in 3-4 years but still you cannot afford kids then or say a wedding.

    Reply

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    January 12, 2019 BRENDON GILL

    It is strange how everybody in this country blames investors and builders for the high cost of houses, yet Australia’s cost of construction is 23% less than America and cheaper than most European cities however it has some of the most expensive lands in comparison to America and Europe, this is because state government’s artificially inflated land prices through blocking supply through planning delays and by adding taxes both state and federal, why do we not recognize that most houses are 40% higher because of these reasons, it is even stranger that governments point the finger at investors developers and builders for the reason for the high cost of housing when the problem is clearly policy set down by government that is the problem, GST, stamp duty, and many hidden charges that are really another form of tax, affordability for all Australians can happen if the government take a hard look at what they have created and stop burying there head in the sand, both Liberal and Labour state and Federal are complicit.

    Reply

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    December 29, 2018 Lisa

    I am a migrant myself, I really appreciate there are so many opportunities in this country with wonderful people. Most people are trying to do the right things. I have worked and studied very hard in Australia and made a good life here like many migrants. The door to go back our own country is open every day, you choose to come and stay in Australia, so please be thankful for this country welcome you. Life is what you made of yourself. Please don’t blame this country. Please don’t expect free lunch and free housing as all our taxpayer, your fellow workers, has to work hard for your expectation. Let us all work hard as a team make this country greater for ourselves and our next generations.

    Reply

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    December 27, 2018 Wayne Ehrlich

    I’ll take your predicted 13% increase for Brisbane, thanks. I have studied the stats and I think it will happen here IF the extra state immigration continues AND that all the approved inner city units are not ALL built.
    We have sat up here in Queensland with low growth rates for many years (read affordable) while Sydney and Melbourne have boomed and now there so may negative comments about the continuing “correction” down there. They must all be Harry Dent followers! I managed to attend Harry Dent on his recent tour BUT don’t accept his predictions verbatim. He has some good models and supporting data BUT it has to be appropriately interpenetrated. I could be a cynic and say he just comes out here when he know we are in a downtrend so he can sell his books and newsletters.
    I think Michale’s use of selected data providers is a much more balanced and rational.

    Reply

      December 29, 2018 Michael Yardney

      Thanks Wayne – let’s look back ina few years and see what has transpired

      Reply

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    December 4, 2018 Peter Horsfield

    The median value in each city at the end of November 2018 was:

    • Sydney $821,438 not $1.12 million

    • Melbourne $656,163 not $870,000

    • Brisbane $493,041 not $550,000

    • Adelaide $433,464 not $510,000

    • Perth $448,336 not $520,000

    • Hobart $451,039 not $485,000

    • Darwin $426,141 not $505,000

    • Canberra $596,141 not $700,000

    Reply

      December 4, 2018 Michael Yardney

      Peter – if your pint is that property values have fallen since this article was first written you are correct. Does this change the fact that prices will recover and reach new highs? Not at all

      Reply

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    December 3, 2018 Julie

    Thank you for your article and comments Michael.We do need a 360 degree approach to make our predictions and columns like yours are of value, whether people agree or not. I feel Media has a lot to answer for, we do need to be honest here and recognise that its no coincidence that what Media creates is usually the outcome. We know this each time there is an election (or the desire to remove a Prime-minister to sure up your own interests). Since 2010 it has been said by many economist that the GFC did not need to happen in Australia, it was a reaction from what people read in the medias “predictions”. People in Australia panicked and stopped spending, which in turn,,, resulted in our economy slowing. There are experts in the USA saying for the past few years, that the big end of town players are itching (pushing) for another crash because it’s where they make huge investments by snapping up bargains, feeding off others losses. I’m certainly no expert, but I have to question where the truth lies. What has really changed since Dec 2017 to swing the housing market into a negative direction when employment numbers are up, interest rates are low, population growth is strong and people are still spending on unnecessary items? Tightening up leading had to be done. I just hope and pray people have the sense to not listen to media this time, (Media moguls with good mates at the top end of town wanting to shift dollars to create bigger tax right offs) and people keep spending as normal. When the purses of the every day consumers close the economy stops and its a slippery slope from there. No one has a crystal ball, last time a very small number of experts got their predictions right .

    Reply

      December 3, 2018 Michael Yardney

      You’re right Julie – the crisis of investor confidence is being led by the media

      Reply

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    November 19, 2018 Tony

    This article is insane. I have not seen anybody forecasting the growth of house market in the next five year. Most people believe the house price will dip another 30% in the next five year.

    Reply

      November 20, 2018 Michael Yardney

      You are right Tony – Australia has 25 million property experts – everyone has an opinion don’t they?
      And then there are some institutions with large research departments and the RBA. I know who’s opinions I’d rather trust

      Reply

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    November 9, 2018 Jim

    On one hand you blame the media and then use the very information reported through the media to support your argument, ie the QBE national house forecast. You cherry pick the data that supports your view but are missing real numbers and data that has already happened.
    Fact: Sydney has dropped by 8.9% in the past 12 months
    Fact: It’s the fastest decline in prices in 3 decades
    Fact: It’s the second largest price correction since the 1990 recession
    Fact: Prices and demand are still softening in Sydney
    Fact: The auction clearance rate is the weakest since the GFC

    There is alignment with Macquarie Bank, Westpac, AMP and ANZ that prices in Sydney will decline by 20% from peak to trough when this correction is all said and done. Also, Herron Todd White’s property clock points to a similar outcome and if you’re on the ground in Sydney property markets, you can see in real time the pull back from buyers.

    Tighter lending practices are not abating and a federal election in the first half of next year will further suffocate activity and magnify the correction. Yes, many can ride the wave but the thought of a 3% increase by 2021 is unrealistic.

    Sydney will be down at least 15% by Feb and this December will be a bloodbath as buyers dessert the market and leave a huge volume of sellers clambering to find a buyer pre-Christmas and in many cases will significantly drop prices to avoid having a listing move into 2019.

    You can be the optimist but please don’t be the fool and ignore real facts about the Sydney market as it discredits all your information and makes it hard to believe anything you report. I’d think most would be happy if the market just stabilised by 2020.

    Reply

      November 9, 2018 Michael Yardney

      Jim
      You’re correct – some are predicting a blood bath – but they have been doing so for years. And I agree some segments of the Sydney property market will fall more than 20% – especially all those new apartments many of which were sold to unsuspecting investors. I’ve read the sources you’ve quoted and I’ve also read the comments from DR Phil Lowe – our RBA Governor – I don’t think he’s a fool – I’ll listen to him

      Reply

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    September 25, 2018 steve weingarth

    At least you are realistic about a mild softening of prices in the major capitals and a long overdue rise in Brisbane,unlike the doom and gloom people interviewed on 60 Minutes recently.Fear generating predictions about price falls goes on every few years and some so-called news and current events programs are irresponsible in making these out to be accurate forecasts from experts.

    Reply

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      October 5, 2018 VICKI

      Agree with you on this – there is a lot of doom and gloom in the media at the moment.
      Also, I like Michaels quote: Fact is: meteorologist tend to predict the weather better than property commentators predict future property capital growth. This is very true.

      Reply

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    July 30, 2018 Rastus

    It’s a sorry reflection of the times we live in when we celebrate the rising cost of providing shelter for your family. The social cost of both parents having to work in order to afford a home – kids in daycare, less disposable income to put to into their development… this is the situation for so many families now. This inconvenient truth is happily ignored by those who profit in the current market, and while money it to be made it is unlikely to change.

    Reply

      July 30, 2018 Michael Yardney

      Rastus I understand where you are coming from. But this is one of the prices we need to pay to be able to live in the best country in the world at the best time in history. Rather than lamenting it, we should be grateful the opportunities Australia offers

      Reply

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        November 28, 2018 Ahmed

        With due respect – basing your economy on deriving brain-drain and short term cash from third world country migrants, on one hand, and making it overly difficult for the locals to be able to afford dwelling…I see Australia going completely without wisdom and driven by greed. There is nothing about this to be referred in terms of being a ‘great country’.

        Reply

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    June 29, 2018 harris

    Thanks – this is intersting. It will be interesting to look back in a few years and see it they’re right

    Reply

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    June 29, 2018 CoreLogic

    always hit and miss with this guy

    Reply


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