As another year comes to an end, it’s appropriate to reflect on the property market around the country and think about why people buy property and the benefits..
Home ownership provides security, stability, the ability to personalise our environment, a feeling of pride and achievement. More often however, people only look at the more tangible financial aspects.
Most people make their money from property by adopting a ‘buy and hold’ approach; long term, property is seen as a good investment, even if there are periods of stagnation. Right now, many investors are asking where they stand; some markets are in decline, some are going sideways, some are bottoming and others have a blue-sky future.
The current growth cycle started around June 2012, with national dwelling values shifting almost 32 per cent higher. The rate of capital gains has been led by Sydney where values are almost 50 per cent higher and Melbourne where dwelling values have shifted 35 per cent higher over the cycle to date.
There was then clear daylight with the other capital cities. Brisbane has seen the third highest rate of value growth over the period at a comparatively modest 14.5 per cent.
For those cities which are now perceived to have peaked, are they due a big fall? Similarly, for those that have not grown much lately, is it their time to shine?
In general, there is still optimism in the property market – even it is not uniform across the country.
This weekend Melbourne, which is perceived to be at or close to the top of the market, had a healthy clearance rate of 65 per cent.
There are many drivers of growth in the property market. In a recent speech, Reserve Bank Governor, Glenn Stevens, said “My guess is that global interest rates are still going to be very low for a good part of the decade ahead.” This is feeding in to investors and their decision-making.
But local decisions are also important; research by Corelogic RP Data analysis shows that, in the cities that have grown most, the largest growth has been in the top end of the market (see below). It believes that this creates ‘spillover’ opportunities in markets such as Brisbane, Newcastle and Adelaide.
Even in markets perceived to have peaked, there is still demand. In a survey of NSW division of Australian Property Institute 44 per cent of industry respondents thought that the Sydney market would run another six months, while 33 per cent expected another year.
Property markets have always had periods of growth, decline and stagnation. If you do your research, your investment can be a good one.