The cities on prop­erty in­vestors’ watch list

The Western Star - - Money Saver Hq - AN­THONY KEANE

REAL es­tate in­vestors try­ing to pick the next place for growth face some tough choices, and the days of house prices dou­bling ev­ery decade look long gone.

The lat­est CoreLogic home value in­dex shows only three cap­i­tal cities grew in the past three months – and two of them are the so-called strug­gling areas of Syd­ney and Mel­bourne.

Mean­while, Moneysaver­HQ anal­y­sis of the data over five years shows a huge vari­ance in house price move­ment and some big swings.

Since 2014, Syd­ney and Mel­bourne have boomed, gone into re­verse, and are now climb­ing again.

Dar­win and Perth dropped the whole time – down 24 per cent and 15 per cent re­spec­tively – while Ho­bart house prices leapfrogge­d Ade­laide, Perth and Dar­win, and are now ap­proach­ing Bris­bane.

Prop­erty in­vestor, author and univer­sity lec­turer Peter Kouli­zos said in­vestors should no longer ex­pect prices to dou­ble ev­ery seven to 10 years.

He said in the past cen­tury house prices had climbed about 2 per cent above in­fla­tion each year. “You can’t ex­pect prop­erty prices to sky­rocket when other goods and ser­vices in the econ­omy are only in­creas­ing 1 or 2 per cent,” Mr Kouli­zos said.

Realestate.com.au chief econ­o­mist Nerida Con­is­bee said prop­erty prices were driven by pop­u­la­tion growth and em­ploy­ment over the long-term, which sug­gested Mel­bourne, Syd­ney and Bris­bane were likely to do best in the next few years. How­ever, struc­tural changes to state economies could also af­fect hous­ing, she said.

“Ho­bart is a good ex­am­ple – it was pre­vi­ously a govern­ment and agri­cul­tural econ­omy, and went to be­ing a tourism and ed­u­ca­tion econ­omy,” she said.

Ms Con­is­bee said in­vestors should work out if they wanted cap­i­tal growth or rental in­come yield. “Syd­ney and Mel­bourne do tend to do bet­ter for cap­i­tal growth longer term but pay ter­ri­ble yields,” she said.

“Prop­erty does do bet­ter if you hold for five years-plus. Buy some­thing you would feel com­fort­able liv­ing in your­self.”

Mr Kouli­zos said his strat­egy of pick­ing the next growth cities started with elim­i­nat­ing those that had boomed – Syd­ney, Mel­bourne and Ho­bart – then cross­ing off those still strug­gling from the re­sources boom fallout – Perth and Dar­win.

“I reckon it’s as easy as ABC: Ade­laide, Bris­bane and Can­berra,” he said.

“Look at what’s hap­pen­ing glob­ally, then look at the pic­ture na­tion­ally, then drill down lo­cally – maybe re­gional areas, too, where they’re build­ing a new hos­pi­tal or univer­sity cam­pus.

“Be­cause you are spend­ing hun­dreds of thou­sands of dol­lars it’s worth tak­ing the time to do your re­search.”

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