Property price growth has been huge throughout many Australian suburbs and towns in the past two years.
That growth may have softened in some areas, but investors be warned, if you are waiting for values to fall substantially before you buy, there’s still plenty of growth to happen in 2023.
Property investment adviser Kate Hill of Adviseable joined Hotspotting founder Terry Ryder in a webinar to discuss how and where to find growth in 2023.
She says opportunities will come from buying in markets with growth credentials at a time of record low vacancies and rising rental yields – while other opportunities will come from buying in markets which are less competitive than before, but with growth in their future.
Hill says real estate thrives in times of economic disruption and raised these five key points:
- Don’t just follow the herd (the media is often wrong!)
- Why now is a good time to buy
- Growth drivers to look for
- Locations to consider
- Follow the infrastructure
DON’T FOLLOW THE HERD (the media is often wrong!)
Hill says following the herd can seem easier, but it’s not necessarily the right thing. Many investors are too influenced by ill-informed media commentary about what is happening in the market, rather than making informed decisions.
She says demand for quality locations will always be there for the long-term, so it is important not to get put off by reporting on short-term trends and fluctuations.
“It can be unsettling at the time,” Hill says. “The hardest thing to do is to forge your own path and be the trailblazer when all of your reading tells you to do the opposite.
“But it is also what sets the successful investor apart from the crowd. You have to look past all of that media white noise, all of that temporary noise and buy in strategic locations.”
She says many got it wrong in early 2020 when they forecast a collapse of the Australian property market – it ended up growing by 25%.
“Keep this in mind,” she says. “Don’t just assume what you’re reading or hearing is fact or that it’s credible because it’s been published by a major media outlet.”
WHY NOW IS THE TIME TO BUY
“I genuinely believe that the window of opportunity to get into the market at a good price is now,” Hill says.
She says a lot of markets in which they are helping clients to buy are very active and are not slowing down.
Investors are achieving good yields and its unlikely prices are going to drop substantially in those good locations.
WHAT ARE THE GROWTH DRIVERS?
Hills says the continuing shortage of properties is what will continue to drive property price growth for the next couple of years.
This has been exacerbated in part by government policies and banking and lending policies which deter investors.
This included the “land tax debacle” in Queensland, where the state government tried to charge land tax taking into account investment properties owners had in other states, which she says they have scrapped.
Many investors left the market during the pandemic as prices increased so much – they took the opportunity to sell at a significant profit to owner occupiers, which also further reduced the rental pool of properties.
Listings are still much lower than this time last year for sale and for rent – and with the international migration numbers expected to increase substantially in the next year the pressure on the housing market will increase even further.
Hills says all of that equals a shortage of rentals and a shortage of homes generally, which will lead to increased property prices and rents.
LOCATIONS TO CONSIDER
Hill says many of the locations that are the focus for Adviseable clients are those they have been operating in for some time, as property is a long-term game.
“Adelaide is still crazy,” Hill says. “There are a lot of cash buyers and investors are missing out to cash buyers, often owner-occupiers making unconditional offers.”
Despite this, Hill says Adelaide is still a very affordable market which makes it more appealing as interest rate rises mean investor borrowing capacity may have reduced.
Other locations they are buying in include Bendigo, where the vacancy rate dropped from 0.9% in 2020 to 0.5% now and the median value grew from $360,000 to $535,000 in that period.
The Sunshine Coast is a similar story, with its vacancy rate down from 2.8% to 1% over the same period and its median up from $555,000 to $795,000.
“I would choose the Sunshine Coast every day of the week over the Gold Coast because, from an investment perspective, the Gold Coast is the one that gets spooked all the time,” Hill says.
“The Gold Coast is very appealing, but it doesn’t have anywhere near the same basic growth fundamentals that the Sunshine Coast does.”
Hill also likes the Olympic precinct in Brisbane where a lot of infrastructure will be built as well as greater Brisbane LGAs such as Ipswich, Moreton Bay and Logan which will also benefit.
“Also appealing from an investor perspective is Western Sydney, around Badgerys Creek, including Blacktown, Liverpool, even down to Campbelltown,” she says.
FOLLOW THE INFRASTRUCTURE
The big growth driver in areas like Western Sydney and other good investment locations according to Hill is the infrastructure being delivered.
She says the airport is a big growth driver which will make the region an economic powerhouse.
“They are spending billions out there, the region surrounding the airport called the Aerotropolis, it’s being developed into a major employment hub that includes the science park.
“There’s rail lines, there’s the science park, there’s the Henry Health Precinct. There is so much happening out there.”
She says be on the lookout for locations with “meaningful” infrastructure projects, things that will create ongoing employment.