AP-REALTY RESIDENTIAL PROPERTY MAILER 4515 NATIONAL MARKET UPDATE
BIBLIOGRAPHY In compiling this presentation we have sourced material and data from a wide variety of sources. Where possible, acknowledgement has been given to these groups or individuals in the body of the presentation.
Chris Hayter - Principal The surging prices of Sydney and Melbourne have been tipped to come to an end across the coming three years by respected market research group BIS Shrapnel. In the Residential Property Prospects 2015-2018 report released by the group today prices have been tipped to take a hit in Melbourne and Sydney, two of the nations strongest property markets, within that period. It s a regular function of the market, it s economics 101. Market booms, people jump in and start building and market gets oversupplied and corrects. With the exception of Brisbane, the nations capitals will become buyers markets.
Off-the-plan-apartments Apartments are likely to be worst hit with those currently buying into off-the-plan developments in hot spots like Melbourne potentially facing a double-blow as they pay at the peak of the market today with the likelihood of getting the keys to the property after the market softens. The report points to overseas migration having tumbled from 237,500 in the financial year of 2012-2013 to just 184,000 across 2014, at a time when new dwelling construction is expected to hit a record level of 210,000 new commencements. There are another 200,000 developments expected to start in the 2015-2016 financial year. In general there s an under supply at the moment and that s something that has to be eaten away at first, Mr Zigomanis said.
Sydney A lack of supply and investor demand are being tipped to carry the city to 7 per cent growth across the next financial year. Sydney price growth is tipped to slow over the next 12 months as affordability is pushed to the limit. The supply side of the equation will still have an impact in Sydney, though the increase in construction is starting to see some of these pressures alleviated, Mr Zigomanis said. That alleviation is expected to lead to a fall in values of 4 per cent across the following two financial years, ending in June 2018. For the full three years, growth will top out at 2 per cent. But once adjusted for inflation the BIS Shrapnel report argues it will see a 6 per cent decline in real terms.
Melbourne Melbourne s city apartment scene could be at the centre of falling median prices in the near future. Strong migration, including unprecedented levels of migration from other states, has helped underpin strong growth in prices in Melbourne in recent years. The interesting thing coming out of Melbourne is that Victoria is actually the strongest of all the states for in flowing state migration, Mr Zigomanis said. That will help over the next three years, but among houses is only tipped to account for 4 per cent growth from June 2015 to June 2018. A 5 per cent rise over the coming 12 months will be followed by contractions in both of the following two years. In real terms, the tip is a 4 per cent fall anticipated over the period.
Brisbane Brisbane is set to remain the last market standing for property price growth in the coming three years. In real terms, Brisbane prices are still below where they were five years ago, so we still think that market is pretty affordable at the moment, Mr Zigomanis said. That comparable affordability is expected to put it at the top of the nations property ladder over the next three years with house prices there tipped to lift 13 per cent across the period. The Gold Coast and Sunshine Coast have a similar forecast, 13 per cent and 12 per cent respectively. Meanwhile Townsville is on track for a 3 per cent lift across the coming three years and Cairns for an 11 per cent lift.
Adelaide Adelaide has a mixed future. A lift in new home construction off the back of first homebuyer incentives is thought to have pushed supply too high in Adelaide. This rise in construction is coinciding with slowing underlying demand as net overseas migration inflows ease, Mr Zigomanis said. With the state continuing to face headwinds in a number of industry sectors, there will be little to place upward pressure on prices apart from low interest rates. In real terms Adelaide is tipped to see both houses and units median prices drop 7 per cent across the next three years, on the BIS Shrapnel forecast.
Perth Perth is likely to have a sluggish few years as changes work through the resource-sector. A paring back of mining and resource sector activity and investment are anticipated to lead the way for a reduction in home values around Perth. The city has already seen median house prices decline in the past 12 months, and is likely to see the trend continue. In inflation-adjusted terms a 10 per cent decline of 10 per cent is tipped across the coming three years. But the end of that period is tipped to be when the market balances out.
Hobart Hobart may benefit from interstate interest. The Tasmanian capital is another market expected to suffer from an oversupply of property thanks in part to first homebuyer grants for new homes. However, there may be a positive light on the horizon. Given the recent and prospective growth in Sydney and Melbourne, there is potential upside to underlying demand if the state experiences a net interstate migration inflow, similar to the early 200s when interstate arrivals largely tree change migrants from the mainland increasingly took advantage of price gains to sell their main homes to downshift to Tasmania, Mr Zigomanis said. Over the coming three years a 4 per cent anticipated growth is likely to be realised as a decline to the same figure in real terms.
Canberra High wages across the city of Canberra are expected to help mitigate a rising number of new properties in its property market. An expected long-term oversupply puts Canberra in a position where a relatively flat market is anticipated. Though a 5 per cent decline in values is considered likely once corrected for inflation. Canberra has the highest incomes of the capital cities and affordability is not as strained as in other cities, which should therefore also prevent any major price declines, Mr Zigomanis said. Units are not expected to be insulated by this, however, with a real terms reduction of 10 per cent on the cards, according to BIS Shrapnel.
Darwin Darwin could have a rough few years ahead for home prices. Investment in the resource sector is believed to have peaked in the NT, according to the report. At the same time, new dwelling numbers have also risen, following a rise in population driven by the resources economy. As investment into the large resources projects comes to an end median house prices are tipped to suffer. The median house price (is) forecast to decline by a total of 2 per cent in the three years to June 2018, which will result in a real house price decline of 10 per cent over the period, Mr Zigomanis said. Units are faced with a 12 per cent decline in real terms.
THE latest report by property Valuers Herron Todd White lists both the Gold Coast and Brisbane as rising markets. Prices are well off the bottom across all residential property categories and land values on the Gold Coast are reported to have increased by 10.7 per cent over the past year, the report s authors state.
Gold Coast upswing Big projects including the Commonwealth Games and Coomera Town Centre have added to the property buzz for the Gold Coast. Source: News Corp Australia Mr Pressley said, property sales volumes have been strong with increases of 11 per cent (houses) and 39 per cent (apartments) from two years ago. Median house values have increased by 11.2 per cent during the last two calendar years. Louis Christopher of SQM Research has the Gold Coast in one of his top three picks for growth this year because of a multitude of factors including the low dollar, high rental yields and steady supply at present.
International markets Property prices may be soaring in Sydney and heating up in Melbourne, but Australia's house price growth looks tame compared with some overseas property markets. Hong Kong's house prices have risen at nearly three times the rate of Australia's, making it the world's fastestgrowing market, a new global index shows. "We would certainly be looking at a top three spot if we were just ranking Sydney," she said. "There's quite a large disparity between Australian cities, even between Sydney and Melbourne." House prices in the Chinese region surged 18.7 per cent in the year to March 2015, compared with the Australian market's relatively modest growth of 6.8 per cent in 2014 (the latest available data), according to the Knight Frank Global House Price Index. Australia's rank of 14 out of 56 residential property markets around the world may come as a surprise to buyers monitoring the Sydney market, but it is an outcome of "a two-tier scenario", said Michelle Ciesielski, head of residential research at Knight Frank.
Fastest growing property markets Lack of supply has strongly impacted prices in Sydney and Hong Kong, Ms Ciesielski said. "Both cities are playing a bit of catch-up in supply and demand because the new [housing] stock has yet to come into market." But unlike Sydney, the Hong Kong market is showing some signs of cooling following a raft of measures introduced by the government in the hope of preventing a house price bubble. Chinese investors have been blamed for soaring property prices in Vancouver, ranked 2nd in the Demographia survey, and California, home to four of the world's 10 least affordable markets. 18.7% Hong Kong 18.6% Turkey 16.8% Ireland 12.1% Luxembourg 9.5% New Zealand 8.8% Sweden 6.9% Malaysia 6.8% Australia 6.7% South Africa
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AP-REALTY RESIDENTIAL PROPERTY MAILER 4515 NATIONAL MARKET UPDATE