Which capital city should you invest in? Margaret Lomas

It's Brisbane, but not its apartments, according to Margaret Lomas when asked which capital city should you invest in?

She suggested Brisbane rather than any other capital city when asked by Peter Switzer.

First she ruled out the other capital cities, Melbourne and Sydney not because "the 'boom' had gone on too long" or "that the 'cycle' told us the end was nigh" but rather because the median price has reached a point where it is well above what the average income earner can afford. 

Demand fell away as prices reached this new peak, reducing the potential buyer pool and for these markets its now become a "waiting game" for wages to "catch up".

Margaret then nixed Hobart and Perth.

Hobart because although it has been performing well, its small population and low population growth usually means it has a year or two of growth then much longer stagnation periods.

Perth is a no because even though it is likely at the bottom of it's current cycle, that doesn't mean it's going to start rising any time soon, and if it does, it won't necessarily be quick.

She says that those living in these markets shouldn't necessarily avoid investing just because they don't know the area they are investing in.

She describes this as a fallacy, a mistaken belief.

"This is because what you know about your area relates to lifestyle, not economics."

Margaret correctly states economics is king when it comes to investing.

She says, "my money’s on Brisbane, and it’s all pure economics."

This is because Brisbane is hitting several key points.

Firstly, the average house in Brisbane is still well below what the average income earner can afford.

She claims, "even without wages growth, interest rates could go up, and property prices could increase, and the average wage earner could still afford to buy property there." 

Secondly, changes to the age profile of the population in Brisbane.

Over the next 10 years it is expected to see those aged 20 to 34 move on to the next stage in life and look at buying a home of their own, according to Angie Zigomanis from BIS.

He said the emerging trend would underpin demand for new housing on Brisbane’s suburban fringe and established housing in the inner-city region.

These people will mostly qualify for the first home owner grant of $15,000 (and stamp duty concessions) which is available on many of the houses on the market, due to the high $750,000 cut off for the grant.

Then Brisbane is also benefiting from infrastructure "tons of it". New University campuses, major medical developments in both north and south suburbs, and main roads, making the commute around all parts of Brisbane easier. There’s also the Queens Wharf Precinct, Brisbane Airport Redevelopment, Brisbane Live Entertainment Arena, Northshore Hamilton and a new International Cruise Terminal, plus quite a few others.

There has been strong jobs growth in Brisbane in both the education and medical sectors, as well as improving employment figures after a few years of poor outcomes.

Strong inward migration is also projected to continue, from not only overseas but interstate migration. 

In addition, over the next 15 years, the population of Brisbane is set to double, In 2015, Brisbane’s population was approximately 2.2 million, and is expected to grow to 4.6 million by 2031.

This means that the city will require 40% more homes than it had in 2006, according to government estimates.

Margaret Lomas concludes by stating "It’s an investor’s dream, just waiting to be grabbed. Just be careful what you buy."

She warns, "apartments in the city are not the best choice, nor are high-end properties where demand is subdued. Think families, millennials and migrants, and find the kind of property that they are most likely to demand."