November Property Clock

There has been a dramatic shift in the last 12 months within the Australian property market. Australia's higher-priced markets are suffering from some of the largest percentage falls seen in decades. On the flip side, the more affordable markets are reversing this trend. This is a clear example that there is always an opportunity to make money in real-estate due to the 1000's of sub-markets across Australia all at different stages of their economic cycles.

- Sydney (Declining) – Sydney has fallen in value by 7.4%, which is the greatest fall in 12 months since 1990. The Sydney market is getting punished by affordability constraints, low yields and lending restrictions. This has in tern created negative sentiment which is also been heightened from the constant stream of negativity from the media outlets. It’s important to put things into perspective. Namely, Sydney has grown by 100% in the last 10 years. A 20% or so fall back is not only due, it’s healthy for the market in the long run. Rethink Investing is not active in the Sydney market due to the poor short/medium term outlook. We predict the market to bottom out in mid 2020.

- Melbourne (Declining) – Melbourne has fallen in value by 1.8%, and in the last three months it is Australia’s fastest falling in value capital city. Melbourne also has the lowest yields in the country. The reduction of easy bank credit is putting downward pressure on Melbourne property prices. Rethink Investing is not active in the Melbourne market due to our expectation that prices will fall for some time yet, and yields are the lowest in the country. We predict Melbourne to be the worst performing capital city market over the next 3 years.

- Brisbane (Rising) – In contrast to our two largest cities, Brisbane's freestanding market is looking particularly healthy. Population growth, infrastructure spending, and affordability are the main capital growth drivers helping prices increase in Brisbane. At twice the affordability of Sydney, it’s not hard to see why net migrations levels out of Sydney and into Brisbane are at record highs. This is creating extra demand for housing and pushing prices up. We believe this is a good market for long-term growth accompanied by strong rental yields. We predict Brisbane to be Australia’s top performing market over the next three years.

- Canberra (Rising) – With average incomes roughly 30% higher than Australia’s second highest paid city (Perth), it’s clear this is creating stability in the Canberra market. Low unemployment, affordability, and positive investor sentiment are helping Canberra’s prices to rise. We expect Canberra to perform well over the next three years. Rethink Investing is considering commercial properties in this market due to high yields and the government abolishing stamp duty for commercial properties under $1.5 million.

- Perth (Declining) – Perth has fallen by over 12% in the last three years. High vacancy rates, poor investor confidence, tougher lending conditions and the void left over from the last mining boom have continually pushed prices down. Rethink Investing is not considering investing in Perth just yet due to high vacancy rates, unattractive yields and poor market sentiment. We believe this market will remain flat for some time.

- Hobart (Approaching the Peak) - This market has been booming over the last 36 months. However, the last three months saw the slowest growth for Hobart over a three month period since 2016. Hobart is now one of the most unaffordable capital city markets in Australia vs local incomes. Prices will flatten as investors no longer see the value that used to be there. After buying over 80 properties in Hobart since 2014, Rethink Investing stopped investing in Hobart last year due to these unaffordability constrains creeping into the market. Currently 60% of all loans are owner-occupied. So, until incomes rise that 60% will struggle to pay more. However, other parts of Tasmania are looking ripe for strong growth over the next three years.

- Adelaide (Rising) - Stable market, good yields and low prices are attracting investors here. No sharp growth is expected for Adelaide in the near future. Rethink Investing would only consider this market if the property was well below its market value. One of the big headwinds for this market over the next few decades is Adelaide has the highest percentage of manufacturing jobs in Australia. As manufacturing gets outsourced overseas, it will be important to work out what types of replacement jobs will be available. This uncertainty will keep Rethink Investing out of the market for the time being.

Scott O'Neill

Director - Rethink Investing & Rethink Financing

Rethinkinvesting.com.au

[email protected]

1300 965 551