Where Are the Markets – Part Two

Posted by Jack Guthrie

This week we will be continue with our update on Australia’s cyclical markets and touch on where we believe the markets are heading for the year.

Sydney

As per usual, Sydney’s property market was one on the biggest talking points throughout 2018. An expected and natural transition into market correction lead to lessening market sentiment for the harbour city. Historically, post boom periods often lead to extended periods of stagnation. In 2019, we are likely to see this situation replicate once again as affordability strains and heightened levels of construction completions continuously dilute demand. APRA’s lift on investment lending may provide a slight reprieve to the investor market throughout the first 2 quarters in 2019. However, economic indicators show New South Wales is weakening on a national level. Subdued growth is likely for an extended period, particularly within the attached dwelling market where affordability is strained, and construction completions remain constant.

Brisbane

Brisbane’s potential cannot be underestimated. The capital of the sunshine state offers exceptional relative value heading into the 2019 year. After a few years of questionable performance, Brisbane is beginning to show signs of strengthened market fundamentals. The city holds an exceptional value proposition with low vacancies and high yields presenting buyers with favourable investment conditions. Over the next 12 months, we anticipate supply to restrict even further and commencements of major infrastructure projects to bolster market sentiment. Ultimately setting the economic landscape to drive performance over the midterm.

Canberra

Throughout 2018 we saw Canberra’s property market experience more modest growth rather than the correction and decline seen in Sydney. Median house prices in our nation’s capital rose a moderate 4%, over the 12 months to September 2019. As Canberra relies so heavily on the public service sector, there are always concerns around the potential for government volatility. With Sydney’s correction well and truly underway, we are likely to see a similar correction occur throughout Canberra. The capital will benefit from the fact that it’s latest boom period was a shadow of what was experienced in Sydney, the correction will likely lead to a period of moderated growth rather than price declines.

Darwin

Since the end of the mining boom in late 2010, Darwin’s economy has struggled to produce the long-term employment growth required to buoy the property market. As a result, the outlook for 2019 remains subdued. With no signs of an economic improvement, population growth will remain slow and will likely provide no substantial increase for property demand. Capital growth is reliant on the growth in population, economy, employment and the imbalance of supply and demand in favour of demand. In its current state Darwin is representing none of these drivers and looks likely to remain a weak in 2019.

As markets continue to shift it is important to keep perspective of where we believe holds the strongest opportunity. At Blue Wealth it is our aim to provide clarity to investors, above the noise that surrounds the markets. This gives our clients the best opportunity to ensure they benefit from investing in the right property, in the right market, at the right time.

Posted by Jack Guthrie, on 5th Mar 2019