Australian Property Market Update
By John Edwards
On the housing front things are continuing to improve, albeit modestly. Auction clearance rates have improved marginally and are now approaching 60% each week. This is still low but a welcomed relief from the mid-50’s of the last few months. It is even more encouraging given the fact that we are now moving to winter, when the markets in the two major auction cities are traditionally slower.
Clearly, we are not out of the woods yet however there are more capital cities moving to quarterly growth. It has been the best part of a year since I was last able to present a number of graphs that were either showing growth or clearly pointing to an improving market. In particular, we are pleased to report that Darwin has moved to growth (see ‘Darwin Units’). Units, being a major component of this market, are presenting a strong and steep upward trend. This is a small market and the recent new resource projects and the location of US troops in Darwin for training will be making an impact. The upward move is very strong and given the size of this market it will tend to exhibit some volatile movement. As a consequence, we should expect a few modest corrections in the short term but this market is again in growth.
Brisbane, Gold Coast and Melbourne have been the main worries in recent times. Each of these markets are now indicating that the worst is over. We still remain cautious about Melbourne as the stock position (oversupply) may not have filtered through sufficiently.
The worst affected market in the correction process was arguably Southport, Queensland. While it does appear that the bottom of the cycle has passed, the upward trend is not currently strong enough to make a definitive call.
Brisbane on the other hand is presenting much more positively. It seems to us that by September, or perhaps even a little earlier, we will be able to report growth in this market again. The rental yield for houses is a respectable 5.1% and our projections as to future median growth, while not outstanding are respectable at 5.1%. This is definitely a market which is now worth exploring for bargains and future quality returns.
- Rental yields remain lower than what they need to be to attract significant investment activity.
-The growth over the last 12 months has not been spectacular but it has been higher than inflation.
- Perth remains the standout performer with rentals for the median house increasing by $65 per week and $30 per week for units. This is significant when you consider the amount a tenant must cover by way of a wage rise to meet the increase. On a before tax basis, a tenant has to get an increase in wages of approximately $4,330 to meet increased obligations for house rentals and a more affordable $2,000 for a unit. The unit increase is probably more affordable as it is close to being equal to an inflation increase in wages.
In short, things have improved but there are some new forming “storm clouds” on the horizon. Notwithstanding the potential storm, it is time to start looking at the Brisbane, Perth, Darwin and Sydney markets for opportunity. In saying this, investments at this time should be made with an eye to cash flow and conservative gearing given the potential for some global international shocks. This process will ensure a positive cash flow outcome if any of the potential negative situations eventuate and interest rates decrease, hence even in a poor outcome the investment will look after itself and produce cash while you wait out any storm.
As always, happy investing!
John E Edwards.
Chief Executive Officer and Founder
About John Edwards…
John Edwards is CEO of FindMeaHome.com.au and Residex, and is recognised as Australia’s leading property researcher.
About Keys To Success Club….
Keys To Success Club is a property club that helps people achieve wealth through property investment.
Australian Property Market
