Property investment

It’s Not All Doom and Gloom for Property Markets

Despite the ongoing media speculation about large 30% plus falls in house prices, there are still plenty of strong residential property markets across the country. Of the nation’s 15 market jurisdictions (8 capital cities and 7 regional markets), 11 have house prices higher than they were at the start of the year

Interestingly, some of the markets that have been performing strongly are ones that have been a little neglected in recent times and are starting to present good opportunities for savvy investors.

The last update from CoreLogic indicated that property prices across the combined capital cities were down only -0.6% over the past month. However, over the year to date prices are still higher by 0.4%.

Source: CoreLogic

The market that continues to be hit the hardest is still Melbourne and that is for obvious reasons. Not only have transactions been stifled by the COVID enforced lockdown measures, but it’s clear that vendors are also waiting for this period to pass.

Conversely, there are a number of markets such as Adelaide and Canberra that continue to be tight and are seeing prices increase.

Comparing COVID to the GFC

Recently CoreLogic and PIPA looked at the best performing areas in the aftermath of the GFC and they found some interesting conclusions.

One of those was that capital city dwelling values had increased by up to 39 per cent over the three years from the end of December 2008. While at the same time, regional markets actually outperformed and increased in value by 65 per cent over that same time period.

This is an interesting observation and one that has some parallels with the current COVID crisis and its impact on property values.

In the short-term, the inner-city areas of Melbourne and Sydney are likely to be the ones that are going to be impacted the most.

Anecdotally, we are also starting to see buyers looking to areas that are outside of the major capital cities all along the east coast of Australia. Over the past few months, there has been plenty of talk about tree and sea changers trying to get away from the major cities and with the ability to work from home greater than its ever been on the surface this seems like it has merit. In some ways, this is in contrast to what we saw during the GFC, with holiday homes and lifestyle properties the first to get sold if the owners fell into financial troubles.

When we look at the numbers we can see that there are signs that these regional areas are already starting to see demand increasing.

Over the current year to July 2020, house prices on the Sunshine Coast are up a solid 8.1%. Contrast this to Brisbane which remains flat. Over the same period, the Gold Coast has increased by 8.6%.

In NSW Newcastle and Lake Macquarie have increased in value by 8.0%, while Illawarra is 12% higher. Sydney over the year is just 1.8% higher.

In Melbourne, Geelong is 5.4% higher while the city is experiencing declines of -1.6%.

Clearly, at the moment, property prices are rising in certain segments of the market and on the surface, there is a demand for areas outside of the capitals.

Areas that are close to the cities, in that they are within driving distance but still well located along the coast seem to be the most popular.

It appears that while Sydney and Melbourne get the headlines in the media, there are a number of opportunities still to be had for buyers in many regional markets.

It’s important to remember that Australia is not just one large property market, but made up of many smaller markets that are all being driven by different forces. Even during COVID, there are still great opportunities for investors who are able to see the new trends that are unfolding and have the financial capacity to take advantage of these.

Related tag: Investment Property Australia

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