A SIGNIFICANT CHANGING OF THE GUARD IS TAKING PLACE IN MAJOR PROPERTY MARKETS AROUND AUSTRALIA. SYDNEY’S DAYS AT THE TOP ARE OVER AND MELBOURNE ALSO HAS PASSED ITS PEAK. MOMENTUM IS COMING FROM SOME OF THE SMALLER CITIES, INCLUDING CANBERRA, HOBART AND ADELAIDE, WHILE BRISBANE REMAINS SOLID. MEANWHILE, DARWIN AND, IN PARTICULAR, PERTH CONTINUE TO PRODUCE WEAK RESULTS ON PRICES, RENTS AND VACANCIES.

Queensland

Brisbane has had elevated sales activity for the past three years. It has delivered only moderate price growth overall, below the levels seen in Sydney and Melbourne, because Brisbane has not had the same level of impact from economic growth, population influx and infrastructure spending as the two biggest cities.

Some individual markets have recorded double-digit annual growth in median prices at times in the past three years, but there has not been the consistent 10%-plus growth across the city that Sydney has experienced.

There is now evidence that sales activity is tapering off and that the remaining momentum is being seen in the affordable suburbs in the outer-ring areas, including in the Moreton Bay Region in the far north, Logan City in the far south and Redland City in the east.

Evidence of oversupply in the inner-city apartment markets continues to grow. And now we are seeing the over-building disease spread to the suburbs, especially on the Northside. Some postcodes have 4-5% vacancies and one is sitting at 9%.

The Gold Coast continues to be a busy market, but investors must be cautious about the high-rise unit market, which has high levels of new supply under construction. The Sunshine Coast is challenging the Gold Coast as the No.1 growth market in regional Queensland, boosted by major spending on infrastructure and new development.

NEW SOUTH WALES

There is considerable confusion about the state of play in Sydney because different research sources have published conflicting data on price growth.

One widely-published research business has indicated strong price growth remains, but multiple other sources (including the ABS) record a sharp decline in the rate of price growth.

Hotspotting’s assessment, based on sales data, is that Sydney is well past its peak. Sales activity has dropped markedly in 2016 and most research sources have recorded much lower rates of price growth, including the Australian Bureau of Statistics, Domain and SQM Research.

Auction clearance rates are artificially high (and have misled some commentators into believing that the market is still booming) because listings are very low – i.e. there are very few properties being offered for sale at auction. The number of buyers in the market is much lower than last year, but so too are the number of properties for sale.

Those still keen to invest in Sydney would be wise to focus on locations destined to benefit from new infrastructure under construction or planned across the city, which is extensive – and mostly concentrated in the western suburbs.

Most of the regional markets close to Sydney, which caught the wave from the capital city, are also past their peak, including Wollongong and Gosford.

Further afield, there remain buoyant regional markets, including Newcastle, Coffs Harbour, Tweed Shire, Bathurst, Ballina, Goulburn, Orange and Wagga Wagga.

South Australia

While Sydney and Melbourne sales activity has dropped markedly in 2016, Adelaide sales volumes continue to rise.

Adelaide is one of Australia’s most under-rated markets and seldom features when investors discuss good places to buy. But the city has a good track record on price growth and offers an attractive level of affordability and value for money. The city economy is underpinned by good levels of spending on infrastructure.

The western suburbs between the CBD and the beaches stand out with an array of suburbs that offer good quality houses at value-for-money prices.

Western Australia

Perth markets represent both danger and opportunity for property investors at present. The city, which led the nation in price and rental growth in 2012 and early 2013, is three years into a cyclical downturn, exacerbated by the wind-down in the resources investment boom.

Sales activity has been falling steadily since 2013 and the decline gathered pace since the start of 2016. Some Perth suburbs have sales volumes at a fraction of their former levels, indicating further price decline is likely. This has been further impacted by vacancies well above 3% in many areas, as workers have left the city in the wake of the resources downturn.

The situation also represents opportunities for counter-cyclical investors to buy well while prices are down and competition is weak. Perth historically has been a population growth leader and one of the strongest capital cities for long-term capital growth. Perth property markets will recover and now is a good time to be looking for bargains.

Investors, however, should continue to avoid the inner-city apartment markets which have high vacancies and an oversupply situation that is likely to get worse before it gets better.

There is little to entice investors in regional WA at present. Mining-related centres such as Port Hedland, Karratha and Newman have had huge declines in value and continue to fall. Lifestyle markets south of Perth, such as Mandurah and Busselton, have held up better but there are few signs of growth at present.

Victoria

Melbourne, like Sydney, has passed its peak and the level of sales activity has dropped markedly in 2016. Also like Sydney, auction clearance rates appear strong and top-end sales are still being made at good prices because listings are low.

The very strong price growth seen in middle-market suburbs in 2015 is no longer occurring and much of the momentum in Melbourne is being experienced in the outer-ring areas, driven by affordability.

There are many warnings current about inner-city apartment markets around Australia, none more than for Melbourne. This market faces the biggest oversupply problem in the nation, even more than Perth and Brisbane.

Regional cities and towns within reasonable commuting distance of Melbourne have gained popularity, following recent price rises in the capital city.

The strongest market in Victoria at present is the City of Greater Geelong, which benefits from its affordability relative to Melbourne and its good transport links to the state capital.

Towns in the Macedon Ranges LGA (such as Kyneton and Gisborne) and also in Mitchell Shire (such as Wallan and Kilmore) are experiencing increased demand from buyers seeking cheaper lifestyle options within striking distance
of Melbourne. 

Northern Territory

Darwin is not the weakest market among the capital cities, but it is close to it. Perth outscores it in terms of high vacancies and decline in rents and prices. But there’s no doubt Darwin is in the depths of the downturn.

Like Perth, Darwin rose, thanks to the resources sector and had standout growth in rents and prices in 2011-2012 and the early part of 2013.

It got particular impetus from the $30 billion Ichthys gas development, but once the considerable impacts of this massive enterprise had worked its way through the economy and property markets, there wasn’t much following behind.

Sales levels across Darwin are now at their lowest in five years and, without major investment projects on the horizon, it’s difficult to see what will inspire recovery. Possibly the recent change of Territory government, after a landslide election result, may inspire something positive.

Tasmania

Markets in Hobart and Tasmania continue to make strong advances. While market activity has dropped markedly in 2016 in the larger cities, Hobart has continued to deliver steady increases in sales.

Hobart leads the capital cities on a number of key parameters. It has the lowest vacancy rate, the lowest house prices and the highest rental returns, making it appealing for mainland property investors. This is underpinned by an improvement in economic indicators for Tasmania, which is no longer regarded as a basket case economy.

Tasmania’s second city, Launceston, also has a buoyant market, despite being impacted by floods in June. The northern port centre of Devonport is another solid market with cheap prices.

ACT

Canberra’s stocks have gradually risen in 2016, particularly for housing markets. While the apartment sector continues to struggle, the Canberra housing market has risen steadily.

Most research sources report steady growth in the city’s median house price and growth in rentals also, but the numbers are less positive for the unit market, which has been previously weighed down by oversupply and has not yet fully recovered.

Most of the growth suburbs are in the north of the city around Belconnen and Gungahlin, although there are some growth suburbs in the south around Tuggeranong.