Australian Property market is made up of many markets, and there are markets within markets.
For example, the Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Darwin, Canberra and regional markets are at different points in the property cycle.
Wikipedia defines property cycle as “a sequence of recurrent events reflected in demographic, economic and emotional factors that affect supply and demand for property subsequently influencing the property market.”
Drilling down into each city, there are various regions within a city, with different things that drive that property market. Furthermore, within each region there are suburbs, which differ from one another and again have different drivers for capital growth and rental returns.
As such, when you read an article, which refers to “Australian property process”, it is labelling Australia as one market and with one lens, even though each city, region, suburb cannot be judged equally. This is a sure recipe for failure when it comes to property investing.
The key to success in real estate is ensuring when you are looking to start your property portfolio, you ensure that:
- You maximise your access to borrowing capacity and equity
- You buy in locations which are yet to grow, and have not had growth for many years
In our nearly a decade of being property investors, we have learnt (and witnessed) that each market needs to be assessed on its own merits.
There are a number of indicators which may determine at what stage in the property cycle is at.
One of the telling factors is the rental yield on offer in each location, when the last peak was and infrastructure spending in a particular location.
Looking back at what has happened in the Australian property markets…
…. back in 2013, many more properties were valued at less than $500,000, compared to today.
The information relating to each city below has been sourced from Core Logic Mapping the Market – September 2018 update [https://www.corelogic.com.au/mapping-market]:
- Houses: Only 1.0% of Sydney suburbs have a median house value of less than $500,000 compared to a much larger 30.0% in September 2013;
- Units: 85.7% of Sydney suburbs currently have a median unit value in excess of $500,000 compared to 47.5% of suburbs five years earlier
Tim Lawless of Core Logic Asia Pacific Head of Research shared a graph on Twitter showing the Sydney Housing Cycle over the last 20 years, which shows what happened over the past 4 downturns and 5 upswings.
This graph shows that whilst there has been downturns in the market, these have been in between long periods of price growth, and the upswings have been much larger than the downturns.
Property prices in Sydney were stagnant from 2003 to 2009 ie a period of 6 years.
Note that past performance is not an indicator of how the market will perform in future.
- Houses: In September 2013, 42.0% of suburbs in Melbourne had a median house value of less than $500,000 compared to 3.8% by the end of September 2018;
- Units: The share of Melbourne suburbs with a median unit value of more than $500,000 has increased to 67.9% in September 2018 from 23.0% in September 2013
- Houses: The share of Brisbane suburbs with a median house value under $500,000 has shrunk from 58.8% in September 2013 to 36.0% in September 2018;
- Units: 7.8% of Brisbane suburbs have a current median unit value in excess of $500,000 compared to 4.8% of suburbs in September 2013
- Houses: As at the end of September 2018, 93.3% of Adelaide suburbs had a median house value of less than $1 million compared to 97.4% of suburbs five years earlier;
- Units: As at September 2013, 16.1% of Adelaide suburbs had a median unit value of less than $250,000 compared to 16.9% in September 2018
- Houses: As at September 2013, 11.2% of Perth suburbs had a median house value of more than $1 million with the share rising slightly to 11.4% by September 2018;
- Units: The share of Perth suburbs with a median unit values of less than $250,000 has increased from 1.9% in September 2013 to 6.5% in September 2018
- Houses: The share of suburbs with a median house value of more than $500,000 has increased from 5.6% in September 2013 to 44.1% in September 2018;
- Units: In September 2013, 39.5% of Hobart suburbs had a median unit value of less than $250,000 and by September 2018 that figure had fallen to 11.9%
- Houses: In September 2013, 9.3% of Darwin suburbs had a median house value of less than $500,000 compared to a greater 16.7% as at September 2018
- Units: At the end of September 2018, 2.8% of Darwin suburbs had a median value of more than $500,000 compared to 21.9% five years earlier
- Houses: The share of Canberra suburbs with a median house value of more than $1 million has increased from 11.7% in September 2013 to 28.3% in September 2018;
- Units: As at September 2018, 77.1% of Canberra suburbs had a median unit value under $500,000 compared to 88.9% five years earlier.
One thing the above highlights is that prices are further ahead than they were 5 years ago.
Depending on where the city is at, prices may go backwards, sideways or forward. It will ultimately come down to the property cycle for that city.
It is about you making the most of:
- The equity you have available currently to invest
- Where you are in your career and life
- Whether you would like to make the property cycles work for you by buying the right property, in the right location which will propel you toward your goals
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