Where are the Markets – Part One

Posted by Jack Guthrie

As markets change from year to year it’s our job at Blue Wealth to ensure clients buy the right property, in the right market at the right time. Markets shift from boom to correction continually due to their cyclical nature. This week’s article will be the first instalment of our 2019 update for “Where are the markets?”, giving insight into this year’s property clock and where the markets are currently.

Melbourne

A milestone year for Melbourne in 2018 saw the city’s population soar past the 5 million mark, highlighting the intense growth that is still occurring throughout the Victorian capital. Melbourne’s median house price still offers relative affordability as our second largest housing market, remaining over $200,000 less than Sydney’s. It also boasts the strongest population and economic growth in the country. With no shortage of employment opportunities and a healthy infrastructure pipeline, all the ingredients are present for a resurgence in strength throughout the market. Sentiment and uncertainty around the Australia’s property market will likely keep any growth in house prices subdued over the next 12-month period. Demand is likely to remain relatively strong for the more affordable apartment market.

Perth

A shadow of its former self, Perth continues to struggle with the absence of a booming mining sector. In 2018 the tighter credit conditions stalled the progress of Perth’s recovery. In the meantime, significant investment in various infrastructure projects has provided residents with an increase in employment opportunities. Many of these projects are being delivered to provide some much needed diversity to the Perth economy, which is clearly still very reliant on the resources sector. From a Blue Wealth perspective, it remains too volatile for approval. We do however believe that the bottom of the cycle has been reached although the market may experience a few more years of stagnation and minimal growth before seeing the opportunity for investors to capitalise.

Gold Coast

The Gold Coast is Australia’s sixth largest city, now supporting almost 600,000 residents. In 2019, infrastructure works on major projects such as Coomera Westfield, and the later stages of the Gold Coast light rail will aid in buoying the economy. The market performance, however, is not expected to trump 2018. The significant completion pipeline of the large density projects will likely subdue performance in the unit market over the midterm, while strong population uplifts will likely drive moderate price growth in land values.

Adelaide

From an investors point of view, although Adelaide provides slow but steady growth which gives investors comfort, the potential to generate strong capital growth is weakened by South Australia’s poor economic conditions. In 2019 the dwindling population growth, employment struggles and lack of local investor market confidence, limits the potential for price growth in Adelaide. While some regions may be attractive to investors as a result of their high yields and lower vacancies, these overall propositions are still inferior to the Melbourne and Brisbane markets where strong yields, low vacancies and superior growth potential are all achievable.

Hobart

Despite experiencing consecutive years of property price growth and punching well above its weight, Hobart remains Australia’s most affordable capital city. With the affordability story starting to weaken, Hobart is beginning to reach a peak in its cycle. The growth period has occurred as a result of a strong sentimental shift and the short term impact of critically low supply levels. The risk of market volatility remains higher in markets such as Hobart who lack the traditional market drivers to sustain heightened demand. Contrary to Victoria’s economy which is experiencing historically high levels of infrastructure investment to maintain levels of economic and population growth, Hobart lacks this more sustainable environment.

Next week we will look at the remainder of Australia’s capital markets and how they will fair for 2019.

Posted by Jack Guthrie, on 26th Feb 2019