Mar­ket May­hem

How to spot value in today’s volatile prop­erty mar­ket.

Australian House & Garden - - Content -

You have to won­der whether we’re in the midst of the most dif­fi­cult buyer’s mar­ket in liv­ing mem­ory. On one hand, there are record and pos­si­bly un­sus­tain­able home prices in Syd­ney and Mel­bourne; on the other, there’s a blood­bath in min­ing towns.

The two big­gest cap­i­tal cities have seen house val­ues soar in the past five years – by 70 per cent in Syd­ney – while prices have been fall­ing in Perth and Dar­win, and there have been warn­ings of im­pend­ing doom in the Mel­bourne and Bris­bane unit mar­kets be­cause of over­sup­ply and tighter lend­ing con­di­tions. Pity the poor home­own­ers in some min­ing towns, where val­ues have fallen by as much as 77 per cent.

Re­cent sta­tis­tics sug­gest that the Syd­ney and Mel­bourne mar­kets may fi­nally be cool­ing. So where is it still pos­si­ble to make cap­i­tal gains? Or to at least re­tain present value?

My view is that the safest place to put your money in Syd­ney and Mel­bourne is in in­ner-ring houses. These cities have a dwin­dling sup­ply of houses near the city be­cause they are be­ing de­mol­ished to make way for units, but de­mand will re­main be­cause of im­mi­gra­tion and be­cause Mil­len­ni­als want to live, work and play close to the city.

Charles Tar­bey, chair­man and owner of the Cen­tury 21 real-es­tate chain, of­fers these ‘hot spot’ sug­ges­tions:

Mel­bourne “Good long-term prospects due to the strength of the econ­omy and the prices of prop­er­ties com­pared to sim­i­lar prop­erty brack­ets in NSW.”

Syd­ney “Con­struc­tion of the North­west rail project is well un­der way. There are still sub­urbs around Rouse Hill that hold value for in­vestors and it is hard not to be­lieve that Rouse Hill it­self won’t con­tinue to en­joy growth.”

Sun­shine Coast “Still rel­a­tively cheap com­pared to other mar­kets. How­ever, if the mar­ket en­coun­ters an in­flux of in­vestor in­ter­est, there is the risk of an over­sup­ply of rental stock.”

Perth “While prices in many ar­eas of WA are still fall­ing due to the down­turn in min­ing in­vest­ment, this trend may be­gin to at­tract the in­ter­est of in­vestors look­ing for value. They should watch ar­eas in and around Perth, as any large in­crease in min­ing ac­tiv­ity can see that mar­ket ex­plode very quickly.”

Cameron Kusher of re­search firm Core­L­ogic says that, while most min­ing towns have seen prices crushed in re­cent years, some have seen sales vol­umes be­gin to lift. Me­dian prices in Isaac, Queens­land, are 77 per cent lower than their Novem­ber 2012 peak. In WA, me­dian prices in Port Hed­land are 67 per cent lower than in June 2013, and in Kar­ratha, 65 per cent lower than Oc­to­ber 2010. In Roxby Downs, SA, they’re

55 per cent lower than Oc­to­ber 2013.

“These towns con­tinue to achieve some of the best rental re­turns, based on cur­rent pric­ing and rents,” Kusher ex­plains. “While we ex­pect very lit­tle in the way of prospects for cap­i­tal growth over the com­ing years, in­vestors look­ing for a pas­sive in­come may be­come more at­tracted to these mar­kets.”

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