Where, not when.
Terry Ryder from Hotspotting:
Here’s the dumbest question an investor can ask: is this a good time to buy real estate? The question shows a fundamental and dangerous lack of understanding about property. A much smarter question is: WHERE is it a good time to buy real estate? Because in a nation as large and as diverse as Australia, at any point in time it’s a good time to buy somewhere. The trick is finding those locations where it’s opportune to buy.
I find myself constantly explaining to consumers that there is no such creature as “the Australian property market”. People think there is because the media keeps telling them there is, aided and abetted by economists who see everything nationally.
The headlines keep proclaiming that “Australian property prices” are falling because those who think nationally describe housing market growth or decline with a single figure to measure the entire nation.
Not one market
It’s a ludicrous proposition and one that misleads and misinforms consumers. So here we are again at the start of a new year and it’s opportune once again to tell people that the essence of success in property investment is understanding that we don’t have one market in Australia. We have lots of markets and your objective is to avoid the ones which are in decline and locate the ones that are rising or will soon do so.
Fortunately, this is not difficult – so long as you can kick the newspaper reading habit and conduct proper research and acquire real knowledge. If you’re willing and able to do that, you’ll be miles ahead of the herd and one of the relatively few who will succeed in this business.
Listen to the better forecasters
If you’ve been searching for predictions on likely outcomes in 2019 – and you’ve been using mainstream media as your primary source – you’ll be massively confused and misinformed, because newspapers and other tabloid media like the ABC have featured only those who have forecast major and widespread price decline.
The vast majority of forecasters – the calm, sensible, rational ones like BIS, Domain, SQM Research, Propertyology and most of the major lenders – have predicted fairly optimistic outcomes in 2019 and 2020. But few of the major newspapers have published their forecasts.
A common theme among the credible forecasters is that Sydney and Melbourne will bottom out in the middle of 2019 and gradually return to moderate price growth, while the smaller capital cities will show growth this year ranging from moderate to strong.
Regions are where it’s at
Very few bother with the regions – which is a shame because the biggest price growth in 2018 was in regional areas and this is likely to be the case again in 2019. One who does look at the regions as well as the capital cities and presents sensible forecasts based on research is Simon Pressley of Propertyology.
Like Louis Christopher of SQM Research, Pressley presents three scenarios in his forecasting, which relate to different outcomes with the lending environment. His scenario which assumes lenders returning to “sensible credit policies” in the first quarter of the year (which I think is likely) has Hobart again leading the capital cities on price growth, with rises of up to 10%.
He sees Perth making a solid recovery, with house prices up by between 4% and 7%. He also expects Canberra, Adelaide, and Brisbane to be good markets with price growth up to 5-6%. He expects Melbourne to bottom out during with the year, with only moderate price decline, and Sydney falling a further 3-6%.
I note that Domain published broadly similar forecasts for 2019 recently and I think Pressley is pretty much on the mark, although I think Adelaide will do better than he predicts and that Hobart growth will be less because I think that market is past its peak.
Propertyology believes regional centers in the resources states Western Australia and Queensland will be among the best-performing markets this year. Pressley suggests the Sunshine Coast and Cairns will lead in Queensland, with big improvement also in Townsville, Mackay, Rockhampton, and Toowoomba.
In WA he likes Albany, Busselton and Margaret River, with Pilbara towns strong also. As always, I urge caution with any market where the mining sector dominates the local economy.
In regional NSW he likes Wagga Wagga, Armidale, Tamworth, Bathurst, Parkes, and Muswellbrook, while in regional Victoria he favours Ballarat, Bendigo, Shepparton, Warrnambool and Bairnsdale. I can’t disagree with much of that. Propertyology and Hotspotting use different methodologies but we often arrive at the same conclusions.
TERRY RYDER is the founder of hotspotting.com.au