Fear-of-missing-out investor activity driving Spring outlook: Simon Pressley

Since the winding back of the federal government’s post-GFC stimulus package, Australian property markets have broadly produced underwhelming returns.

Over the last two years, Sydney and Melbourne have been strong. Conversely, Perth and Darwin markets are receding and it is likely to be some time before the clouds lift.

Approximately 70% of properties throughout Australia are worth much the same today as they were five years ago.

Recent jobs data for Sydney and Melbourne has been impressive an I believe that there will be further growth in to the New Year, albeit at more moderate levels than we’ve recently seen.

First home buyers who are concerned about being squeezed out of Sydney and Melbourne markets might reconsider what they are wishing for.

We’ve observed a refreshing trend wherein more people are realising that rent-money isn’t necessarily dead-money.

Deposit monies can be made to work harder through investing it in one of the (strategically-chosen) 9.6 million properties across the country as opposed to limiting the potential return on investment by choosing a property that must meet the specific personal requirements of a family home.  

While our research provides us with great confidence about the outlook for Sydney’s economy, the lack of housing affordability will result in lower rates of growth over the medium term compared to many other locations.

Melbourne is a different story; I have consistently stated we have considerable concerns about the impact which the closure of three car manufacturing plants will have on Melbourne’s market from late-2016 onwards.

Record low interest rates combined with the FOMO (fear-of-missing-out) effect amongst Sydney and Melbourne residents has resulted in heightened investor activity.

A large majority of client enquiries received over the last six months have been from southern-based investors looking to invest in Brisbane.

While we believe Brisbane’s outlook is sound, its economy is not as robust as Sydney and Melbourne.

We have done some investing in Brisbane however, Propertyology has been actively helping investors to get in to alternative markets around Australia that we believe have better potential.

Generally speaking, market fundamentals across the country are sound although the missing ingredient continues to be confidence.

Building approval data from the last couple of years have been at record levels and most of the new supply is focused on capital cities. This, combined with APRA enforced tighter credit conditions, is likely to result in moderated rates of price growth. 

An eventual reduction in property transaction volumes will mean lower taxation revenues for all levels of government. Regulators appear to have over-reacted by applying across the board policy changes in attempt to de-stimulate markets in 30% of the country (Sydney and Melbourne) whereas the other 70% of the country would actually benefit from stimulus.

With the level of investor stock expected to rise in Australia’s biggest cities pressure on rents is likely to ease and rental yields will soften.

Four of the six cities which Propertyology is currently investing in are strong regional locations which have a diverse mix of industry drivers, very affordable housing, and controlled rates of supply.

Whilst Propertyology does not publicly disclose exactly where we are investing, we believe that the stronger markets over the medium term will contain specific industries within their economic profile. These include agriculture, international students, tourism, manufacturing of premium goods, health, and professional services.

Simon Pressley is Managing Director of Propertyology, a REIA Hall Of Fame Inductee, property market analyst, accredited property investment adviser, and Buyer’s Agent. Propertyology works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.