I recently attended the REBAA (Real Estate Buyers Agent Association) conference in Sydney. Tim Lawless, of Core Logic/RP Data, presented trends and directions for the national real estate market. Core logic is the main property data and analytics service in Australia. There were many take home points from the presentation but the stand out for me was understanding the importance of Australian residential real estate as part of the overall economy.
The combined value of residential housing is 5.9 trillion dollars. The next major asset class is the Superannuation Funds at $2 trillion, followed by $1.7 trillion in listed stocks and $0.7 trillion in commercial property. Some people may argue that these figures prove how overvalued and bloated this sector is but there is no argument that residential property is a major economic driver.
Managing it with better tax and concessions is certainly important. A case could be made that existing property owners are benefiting over new entrants in the market with the present capital gain and gearing incentives. That aside, it would be adventurous, or even foolish, for state or federal governments to fiddle with the levers recklessly.
There are some concerns. Household debt in Australia is running at 51% and has almost tripled in the last 25 years. The debt to income ratio is running at 163%. It now takes between 7 – 10 years of an average income to pay for a median priced house in Sydney or Melbourne which is one of the world’s highest ratios. It is important that debt is kept in check and that asset bubbles aren’t encouraged. Another concern is that during the last quarter, it was the first time ever that investment loans overtook owner-occupier mortgages.
It has therefore been prudent that most of the major banks increased the rate for investment loans as a way of cooling irrational exuberance in the market. NAB has raised all of its “Interest Only” loans by 0.29%.
The prediction for our local market is interesting. Core Logic is suggesting that there will be a probable increase in demand for “lifestyle” property. This includes Byron Bay and Northern Rivers as well as Gold Coast and Sunshine Coast. An increase of interest is predicted as more Baby Boomers cash out of southern cities looking for retirement destinations. Many retirees were forced to put their sea change on hold due to the GFC. Now, with Sydney and Melbourne prices probably hitting their tops, there will be a surge of downsizing and relocation activity.
Core Logic predicts upward movement for Brisbane and South East Queensland in general. The cycle of Brisbane having a run after strong Sydney growth is well documented. Property prices and rental yield are now very attractive in this capital compared to both Sydney and Melbourne. But be aware of unit sales: there is serious oversupply of off-the-plan apartments in Brisbane, which will probably not meet their listing price at completion. Perth and Darwin are also on the decline as well as all mining town investment options. Mackay is a good example of a property cycle boom and bust. Rental yields were astronomical during the mining boom and with strong capital growth but now selling prices have declined almost 50%.
Otherwise the conference was very worthwhile. REBAA is the accredited association of all professional buyers’ agents throughout Australia. If anyone you know is contemplating approaching a buyer’s agent to assist with their next property purchase, please suggest they look for a certified BA who is a member of REBAA. I also look forward and appreciate all of your referrals. Word of mouth is my main source of new clients – for buyer’s agency, vendor’s advocacy and home loan finance – so ensuring all of my previous clients are happy is important to me.