Date: 19 Mar 2010 Comments: 0

The GFC in Australia has come and almost gone in the virtual blink of an ipod. And whilst the USA suffered and is still suffering from the rampant greed and egos’s in financial institutions that leveraged on leverage and then destroyed more wealth in their country than any other incident I can remember, Australia pulled through relatively unscathed in comparison and recorded positive growth in our residential property market.

There is no doubt that the finance industry in Australia suffered a hit, with less money in the kitty, the banks tightened their belts and consumers where forced to jump through hurdles to beg for a loan. Development funding was relegated to museums with people passing by saying, “I remember the days when developers roamed the earth”. And
offcourse construction slowed, which is now increasing our supply & demand problems.

The doom and gloomers that assisted with destroying sentiment in our great country are now walking around with egg on their faces. According to Residex, every capital city and state in Australia except WA country regions recorded positive growth with the average growth over the last ten years being 9.89% and over the Nov 08 to Nov 09 period Australia recorded an average growth of 5.13%.

So what happened and why didn’t the bottom fall out of the Australian residential property market like it did in the USA? And should the sensationalist media reporters and the doom and gloomers be held accountable for their irresponsible statements that caused panic driven mums and dads to sell of their properties in anticipation of a crash in prices? Well those that sold not only took a hit for the sale costs, but also lost thousands in capital growth and will now incur further expenses if buying back into the market at increased prices.

The reasons for our growth are really quite compelling. Australia is not called the lucky country for no reason. And here are the top 10 reasons why residential property did and will continue to grow in Australia.

1. Population growth is strong due mainly to immigration & baby boomers.

2. Undersupply of housing placing strong upward pressure on prices.

3. Rents are soaring due to demand, undersupply & low vacancy rates.

4. Low interest rates on historical standards which helps cash flow.

5. Strong economy fuelled by strong demand for resources from China and Asia.

6. Construction and land prices are likely to rise sharply.

7. Property allows you to leverage your money higher and safer.

8. Confidence in equity markets and superannuation funds was shattered.

9. Investors receive a 50% tax break on property investments.

10. Australia’s lending fundamentals are sound.

 

State of the Market

 

NSW – Although NSW is experiencing the largest housing shortage of all states, the affordability factor will most likely reduce capital growth to a lesser extent than other states over the long term. Especially during periods of higher interest rates. However this then drives demand from renters and increases yield for investors as potential home buyers opt for rental accommodation.

Over the last 10 years, Sydney prices grew the least of all states at 6.6% but had a substantial 9.29% growth during Nov 08 to Nov 09. Even still, over the last 10 years investors in Sydney would have seen a doubling of property prices.

The importance of research is paramount to property investing because as they say, you make your money when you buy, and buying an overpriced property
is not going to help. Sydney is now making a run so there are good buying opportunities to be found in affordable stock.

 

VIC – Victoria is on the move with property prices in many areas at prices that are set to explode. Melbourne prices increases 9.93% over the last 10 years, but actually increased a whopping 10.95% over the Nov 08 to Nov 09 period. Obviously Melbournians didn’t get the news there was a GFC.

The ability to pick up good house and land opportunities in areas such as Melton for under 350k, presents opportunities to see larger capital growth expectations over the next decade. The theory being that it would be easier for a property valued at 300k to double in price than for a 700k property to double in price. Which leads us to our recommendation to always by well placed medium value properties, as that is where the greatest demand and growth will be.

 

QLD – Whilst the Gold Coast is still overcoming the problems of development stalling and developers meeting the market, there is massive opportunity abounding. Areas such as Inner Brisbane especially along the river and SE Queensland will continue to remain sought after due to population growth, employment and
Government Infrastructure.

Brisbane enjoyed 11.7% growth over the last 10 years, but only increased by 2.67% from Nov 08 to Nov 09.

 

SA – Well I have always said that Adelaide is the most consistent of all property markets in Australia and once again this has proven correct. The peaks and troughs of the larger capital cities does not seem to have as much effect and property investors in Adelaide generally always get a good nights sleep.

With a comfortable 10.52% growth rate over the last ten years and recording 5.12% growth during Nov 08 to Nov 09, Adelaide investors are laughing all the way to the bank. Affordability issues are not posing a big as a problem to Adelaidians as they may be in Sydney, so strong demand will continue to see prices rising steadily. With the northern areas of Adelaide still in strong demand with a predicted 2000 soldiers including spouses and children relocating to the RAFF Edinburgh
base over the coming month’s development in the area is booming. Two new super schools, new shopping centers and the construction of the northern expressway all
adding to the demand. Full turnkey house and land packages starting in the low $200k range offer great opportunities for investors.

 

NT – The top end had a top run recording 10.71% growth over the last ten years, and a staggering 15.63% growth in Darwin and the NT overall recorded an amazing 17.04% growth in the Nov 08 to Nov 09 period. My good friends in Darwin that sold a few years ago and investedin the share market are now feeling the frustration, whilst those that bought and held and added value to their properties are now out in Darwin harbour in their new fishing boats catching giant Jewies.

Will the NT continue to run, well it’s unlikely to see such an amazing pace for sometime again. Time will tell.

 

ACT – Canberra saw growth of 10.61% over the last 10 years and 8.07% over the Nov 08 to Nov 09 period. So whilst it is in the middle of nowhere, it proved
to be the 4^th highest growth area in Australia.

 

WA – Perth recorded 12.2% growth over the last 10 years and struggled to find form over the Nov 08 to Nov 09 period, but still got their with a 0.24% growth rate. WA country was the only area as a whole in Australia to actually record negative growth with a rate of -7.66% over the Nov 08 to Nov 09 period.

Well we all know why, it was due to inflated prices driven by a resource rush to the head that had to cause a brain freeze. Many savvy WA investors that enjoyed the past massive growth flew to Adelaide with wads of cash and bought up affordable houses at comparably bargain based prices.

 

Wrap up

So will Australian properties continue to grow in 2010? The simple answer is yes if you get it right. The real is question is, what locations are going to enhance growth and what properties should I buy.

Go to www.propertyinvestmentaggregators.com.au for more details or call 08 8297 1333 today.

Property Market report by Les Unferdorben

Director – Property Investment Aggregators Pty Ltd

RLA 221406