Residential Investment

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<p>A defining feature of 2016 was that knowing where NOT to buy became as important as where to buy.</p>
<p>Until recently, for investors it’s simply been a matter of buying in the places where prices were rising, mainly Sydney and Melbourne.  For most of the past 3-4 years, it’s felt as if owning real estate anywhere in the two biggest cities was a guarantee of capital growth.</p>
<p>As we contemplate 2017, buyers need to be lot more particular about their choice of location. Now, more than any time in the past four years, there’s a real prospect of losing money if you choose badly. Next year my No Go Zones report will be as important as the Best Buys report.</p>
<p>And the key factor in that equation is oversupply, specifically for apartments in specific locations. Both Sydney and Melbourne, as well as other parts of Australia, have locations I classify as “danger markets”.</p>
<p>And it’s clear that people are already choosing badly.</p>
<p>CoreLogic has published a report which was designed as the most popular places to buy but which, inadvertently, served as a de facto No Go Zones report. It highlighted most of the worst places to buy in the nation.</p>
<p>The fact that these were the most popular places for buyers, based on the number of sales in the past 12 months, just shows how bad real estate consumers are when it comes to choosing location - and how little research some people do before committing big money.</p>
<p>According to CoreLogic, the most popular market in Australia is the Surfers Paradise apartment market (1,616 sales in the past 12 months), followed by the Melbourne CBD apartment market (1,296). </p>
<p>I’m trying to think of a worse place to buy real estate in the major population centres of Australia, but there are few I can think of. The only real contenders would be the inner-city apartment markets in Perth and Brisbane.</p>
<p>The Brisbane CBD also makes the Top 10 list of most popular places to buy apartments in Australia, alongside the CBD, Southbank and South Yarra in Melbourne, four highrise locations on the Gold Coast, the Adelaide CBD and Dee Why in Sydney.</p>
<p>Not all of those locations are absolute duds but most of them are.</p>
<p>You have to wonder about the thought processes behind buying an apartment in Surfers Paradise. Of the major markets around Australia, there are few with a worse track record on capital growth. The median price today is lower than it was 10 years ago. Very few locations have a record so bad.</p>
<p>Of course, a poor past record doesn’t disqualify a location from the prospect of future growth – but there needs to be evidence that something has changed, or will change to turn the situation around.</p>
<p>But the situation with the high-rise suburbs of the Gold Coast is not changing. It’s situation normal – developers going overboard and building too many apartments. The Gold Coast economy is currently strong and there is growth to be found in the city’s real estate market – but not in the high-rise suburbs, where developers are determined to repeat history through overbuilding, in the belief they can make sales by marketing to poorly-researched investors interstate and overseas.</p>
<p>In the Melbourne CBD, the median apartment price is lower than it was a year ago and three years ago, and about the same as it was five years ago. Is anything set to change? Yes, but not for the better. Massive oversupply will cause vacancies to rise, with rents and property values falling.</p>
<p>Ditto near-city locations like Southbank.</p>
<p>So, as a guide for consumers on where to buy, this list is worse than useless – it’s dangerous.</p>
<p>There’s a different look about the list of Top 10 most popular places for house sales, but as a guide for buyers it also has little value. It consists of new suburbs on the periphery of Melbourne where lots of new homes are being built and three NSW regional cities which are treated as a single suburb, rather than being diverted into individual suburbs like most cities.</p>
<p>So, again, meaningless information of no value to serious investors.</p>
<p>Sadly, many investors employ the “me too” research method. If everyone’s doing it, it must be right. Right?</p>
<p>Those who apply that method after reading these lists, especially the Top 10 list for apartments, run the risk of losing serious money.</p>
<p><em>Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></em></p>
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terryryder-YECXbqmri2

Where not to buy property: Terry Ryder

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<p>As the Melbourne market gradually winds down, locations in regional Victoria are rising. Regional cities and towns within striking distance of the state capital in particular are travelling well.</p>
<p>There are conflicting views about whether Melbourne has passed its peak or whether it’s still booming.</p>
<p>My research indicates the city’s market has undoubtedly passed the peak in its cycle, with a significant reduction in sales activity since the start of the year. The markets that showed exceptional price growth in the past 12-18 months, particularly middle market suburbs, are no longer growing.</p>
<p>There are still some good sales happening, caused partly by a shortage of listings, which is helping to keep prices strong in selected locations. But the market that existed in 2014 and 2015, with sales activity rising strongly and prices achieving double-digit annual rises in many areas, is no longer happening.</p>
<p>But regional markets close to Melbourne are rising. I have written in the recent past about the City of Greater Geelong, which is now the strongest market in the state.</p>
<p>Bendigo and Ballarat, both strong regional economies close to the state capital, are solid markets with steady price growth.</p>
<p>In between those cities and Melbourne, there are two municipalities which have caught the wave from Melbourne and grabbed the attention of people seeking an affordable lifestyle just outside the city.</p>
<p>These are Macedon Ranges Shire and Mitchell Shire. In a July column I touched briefly on these places in discussing state government population projections.</p>
<p>Macedon Ranges is expected to grow its population 25 percent over the next 15 years. But the municipality likely to see the most dramatic increase in population is Mitchell Shire, which is forecast to more than double its population from 40,000 in 2016 to 81,500 in 2031.</p>
<p>This will make Mitchell Shire - a little north of Melbourne, including towns such as Kilmore, Seymour, Broadford and Wallan - the fastest-growing area in the state.</p>
<p>In the next 20 years Wallan (which is about 60km from the Melbourne CBD) is projected to grow from 11,000 to 31,000, while the village of Beveridge is forecast to explode from the current 1,700 to 21,000.</p>
<p>The towns of Macedon Ranges have already experienced substantial price growth. Towns with big increases in median prices in the past 12 months include Gisborne (up 11 percent), Riddells Creek (up 14 percent), Macedon (up 30 percent) and Mt Macedon (up 18 percent). The median house price for Macedon has risen from $530,000 to $685,000 in 12 months.</p>
<p>Now we’re seeing the towns of Mitchell Shire starting to move. The attractions are affordability relative to Melbourne; a relaxed country lifestyle; and proximity to Melbourne with good road and rail links. It’s feasible to live there while commuting to jobs in Melbourne (keeping in mind that most Melbourne jobs are NOT in the CBD – many of them are in the northern suburbs).</p>
<p>Median house prices include $350,000 in Kilmore, $240,000 in Seymour, $285,000 in Broadford and $380,000 in Wallan.</p>
<p>To date price growth has been moderate – around 5-6% in the past 12 months – but more is expected in the near future.</p>
<p class="Body"><em>Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></em></p>
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Forget Melbourne, the regions are Victoria's rising property hotspots 

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<p>The need to “dig deep” isn’t just something footy players seek to do in the final quarter of a game – it’s an important mindset for property investors.</p>
<p>Among the many problems on the property playing field is the constant reporting of generalised data. A single figure can describe the entire market in a city of millions.</p>
<p>Unless consumers are willing to delve a little deeper, they will miss the myriad different stories lurking beneath the veneer of that single growth figure.</p>
<p>Some of those stories are strong growth scenarios that investors might want to know about. Equally there are danger signals alerting the switched-on practitioner to traps they should avoid.</p>
<p>There are dozens of examples in the latest quarterly edition of Market Monitor published by the Real Estate Institute of Queensland, with a particular focus on Brisbane and the Gold Coast, two places that are attracting plenty of attention from investors nationwide.</p>
<p>The annual growth in the median house price for the Brisbane City LGA is a moderate 5 percent. I’ve heard talking head TV personalities quote numbers like that and tell people that not much is happening in that market and investors should look elsewhere.</p>
<p>The dig-deeper philosophy would alert the more alert to places that are doing significantly better than the average. Brisbane City is a very big municipality, way bigger than equivalent LGAs in Sydney and Melbourne, and covers a large chunk of metropolitan Brisbane. </p>
<p>There are around 130 suburbs in the Brisbane City LGA and that 5 percent annual growth figure does a thoroughly inadequate job of describing the state of play in its various markets.</p>
<p>Within that sprawling municipality Banyo, Carina Heights, Robertson, Wilston, Yeerongpilly and Seven Hills all have something in common – they’ve recorded growth above 15 percent in their median house prices in 12 months (although the 23-25 percent growth for Robertson and Yeerongpilly may be misleading because of small sales samples). </p>
<p>Others with double-digit annual growth include Bulimba, Calamvale, Carindale, Clayfield, Coorparoo, Everton Park, Graceville, Greenslopes, Grange, Hemmant, Highgate Hill, Holland Park West, Inala, Jindalee, Lutwyche, Macgregor, Mackenzie, Manly, Mansfield, New Farm, Norman Park, Sunnybank Hills, Wishart and Wooloowin. </p>
<p>They cover widespread price ranges, from Inala (median $350,000) to New Farm ($1.5 million).</p>
<p>There are numerous positive growth stories there that investors might want to know about - but are unlikely to discover if their idea of research is skimming the daily newspaper. </p>
<p>There are some well-hidden negative news items as well. Some of the leadership in the REIQ are in denial about Brisbane’s inner-city apartment over-supply. If you read the executive summary, this is what you would find: “The unit market in the Brisbane CBD has continued to face the question of oversupply and so far the data does not support that verdict.”</p>
<p>But the small print data in the report portrays a quite different picture.</p>
<p>The vacancy rate for inner-city apartments is close to 4 percent (and figures from other sources suggest it is considerably higher). It will rise when new high-rise projects are completed.</p>
<p>While Brisbane City’s median house price is up 5 percent in annual terms, there is no change is the median unit price. And several individual inner-city markets have recorded a decline in the past year, including the CBD (down 1.5 percent), East Brisbane (down 4.1 percent), Bowen Hills (down 7.8 percent), New Farm (down 3.8 percent), West End (down 1.6 percent) and Fortitude Valley (down 5.9 percent).</p>
<p>Median prices can be unreliable and misleading, especially for unit markets, but there’s a fairly distinct pattern there.</p>
<p>An analysis of the Brisbane unit market by Urbis indicates that sales levels have fallen for three consecutive quarters and sale prices have been “steadily decreasing” since the end of last year.</p>
<p>Few of these inner-city apartment markets have recorded any rental growth in the past 12 months and several have delivered falling rents. In the Brisbane CBD the median unit rent has dropped from $600 per week to $570, while New Farm/Teneriffe is down from $510 to $500 and Kangaroo Point has dropped from $495 to $475.</p>
<p>The median rents for the Fortitude Valley and South Brisbane precincts are unchanged.</p>
<p>There are similarly divergent stories to be discovered within the many different markets collectively known as the Gold Coast.</p>
<p>Market Monitor says the median house price is up 6.7 percent in 12 months, but there are plenty of suburbs with growth above 10%. A small number – including Broadbeach Waters, Hope Island and Reedy Creek – are credited with growth in the 16-20 percent range, while the most expensive housing market on the Gold Coast, Mermaid Beach, has allegedly increased 30 percent in 12 months.</p>
<p>The single generalised figure for the Gold Coast apartment market portrays a 3.3 percent rise in the median price, but numerous individual markets have done much better. Hope Island median unit price is apparently up 20 percent in 12 months.</p>
<p>But the big beachside high-rise precincts continue to struggle. Surfers Paradise has recorded a small annual rise in its median price, but it remains 4% lower than five years ago. The Mermaid Beach median unit price is down 1.4 percent in 12 months and 4.1 percent lower than five years ago. Broadbeach is up marginally in 12 months but 13 percent lower than in 2011.</p>
<p>Against that trend, both Main Beach and Southport have recorded meaningful annual rises in their median unit prices and are a little ahead of the price levels of five years ago.</p>
<p>The contrasting situations seen in different sub-markets entail an important lesson for property investors. Ignore the shallow one-figure-for-each-city nonsense published by mainstream media and dig deeper to find the information you need to know to buy wisely and safely.</p>
<p> </p>
<p><em>Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></em></p>
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Queensland's big beachside high-rise precincts continue to struggle

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<p>Melbourne still has strong numbers for price growth, but its up-cycle is nearing the end.</p>
<p>Sales activity, while still solid, is falling steadily and the number of growth markets is close the lowest levels since the up-market started.</p>
<p>The other clue pointing to the end of the cycle is that all the precincts that still have multiple growth suburbs are at the lower end of the market - most are outer-ring suburban areas. It’s now difficult to find inner-ring or middle-ring precincts with growth suburbs.</p>
<p>To demonstrate the steady decline in sales, a comparison of numbers in successive March Quarters shows this pattern: 33,109 (2015); 28,899 (2016) and 28,948. Sales in the June Quarters have been 38,031 (2015), 34,115 (2016) and 32,300 (2017).</p>
<p>In Hotspotting’s research for The Price Predictor Index, the total number of suburbs with growing sales activity has dropped from 96 in the Autumn report, to 60 in Winter edition and further to just 35 in the Spring survey.</p>
<p>These trends confirm a steady diminution in the strength of the market. And in terms of annual price growth, the latest data from CoreLogic has Melbourne ranked third on dwelling price growth behind Hobart and Sydney.</p>
<p>The remaining growth locations are in the cheaper areas, such as the LGAs of Brimbank and Melton (west); Hume and Whittlesea (north); Wyndham (far south-west;) and Frankston and Mornington Peninsula (far south/south-east).</p>
<p>But even these affordable markets are gradually declining in terms of the number of growth suburbs.</p>
<p>The leading precincts are Whittlesea and Wyndham LGAs. Whittlesea is consistently one of the city’s strongest markets, driven by affordability, infrastructure and jobs nodes.</p>
<p>We have identified four suburbs with growing sales momentum, down from six in the Winter survey. The suburb of Epping is one of the remaining strong markets, with sales moving from 115 to 145 to 135 to 160 to 172 in recent quarters. </p>
<p>In neighbouring Hume, growth suburbs include Broadmeadows, Roxburgh Park and Meadow Heights (where sales have lifted from 27 to 29 to 34 to 45 to 51 to 54 in the past six quarters).</p>
<p>Wyndham in the south-west is the other stand-out, led by Hoppers Crossing, Tarneit, Williams Landing and Werribee.</p>
<p>The Brimbank LGA has been one of the Melbourne’s most outstanding markets for the past 2-3 years. It still has three suburbs with rising sales momentum but a greater number of Plateau markets – further evidence of the wind-down in the market.</p>
<p>Cheaper markets in the far south/south-east, including the LGAs of Frankston, Casey and Mornington Peninsula, still have growth suburbs but, they are outnumbered by suburbs with Plateau-ing sales activity.</p>
<p>Upmarket and Middle Melbourne areas remain solid but most are dominated now by Plateau markets: they include the LGAs of Whitehorse, Moreland and Kingston. Very few growth suburbs remain.</p>
<p>There are also many suburbs where sales activity has dropped considerably, compared to 2014-2015 levels. They include Box Hill, Brighton, Brunswick East, Caulfield North, Chadstone, Clayton, Doncaster, Footscray, Glen Waverley, Hawthorn, Kew, Richmond, Rowville, South Yarra, West Melbourne and Windsor.</p>
<p class="BodyCopy">The worst performers are the inner-city unit precincts. We rank the CBD, Southbank and Docklands as Danger markets, as well as Carlton and Collingwood.</p>
<p class="BodyCopy"><span>Terry Ryder is the founder of </span><a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a><span>. You can </span><a href="mailto:%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20var%20prefix%20=%20'ma'%20+%20'il'%20+%20'to';%20var%20path%20=%20'hr'%20+%20'ef'%20+%20'=';%20var%20addy38821%20=%20'ryder'%20+%20'@';%20addy38821%20=%20addy38821%20+%20'hotspotting'%20+%20'.'%20+%20'com'%20+%20'.'%20+%20'au';%20document.write('%3Ca%20'%20+%20path%20+%20'/''%20+%20prefix%20+%20':'%20+%20addy38821%20+%20'/'%3E');%20document.write(addy38821);%20document.write('%3C//a%3E');%20//--%3E/n%20%3C/script%3E%3Cscript%20type='text/javascript'" target="_blank">email him</a><span> or follow him on </span><a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></p>
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Melbourne CBD, Southbank and Docklands labelled danger markets

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<p>Property investors tend to be drawn to boom markets, seeking rapid growth.</p>
<p>It’s understandable, but not always smart. Sometimes the outcomes are not what buyers expect.</p>
<p>Sometimes, also, buyers are not suited to the kinds of markets that attract them. Those with risk profiles that lean towards steadiness and safety should not be in resources-related regional centres or glamour high-rise markets like Surfers Paradise.</p>
<p>They should be in markets likely to deliver solidity – the consistency markets.</p>
<p>The best analogy I can provide is this, taken from one of my reports for investors:</p>
<p>The most-watched athletics events at any Olympics are the sprints. They’re excitement-plus, particularly when they feature athletes with star quality like “world’s fastest man” Usain Bolt.</p>
<p>The long-distance contests have their followers but are boring by comparison. Only diehard watchers sit through the two hours-plus of the marathon – people who admire grit and stamina more than flashy skills. You should have a similar attitude to real estate.</p>
<p>Many investors and developers go for the sprinters of real estate. The mining towns and the places with star quality like the Gold Coast attract many of property’s spectators and speculators.</p>
<p>But, in real estate, there’s a lot to be said for being boring. Many of the best performers are the unglamorous contestants. While the sprinters of real estate pull up lame or go down with cramp, the long-distance runners just keep on chugging along.</p>
<p>This speaks to the importance of seeking locations that offer consistency.</p>
<p>Of the various periodic reports I work on, my favourite is the Price Predictor Index which looks for patterns in markets to provide about the likely future movement in prices. We highlight the growth markets and also the ones we classify as danger markets, the ones where prices are likely to fall.<span style="font-size: 12.16px;"> </span></p>
<p>But equally important are the consistency markets. These are the suburbs and towns that deliver consistent sales levels, quarter after quarter, year after year. They’re solid markets which represent safety for property consumers. They’re unlikely to deliver boom-bust scenarios.</p>
<p>Consistency markets also tend to have good price growth. The Autumn edition of The Price Predictor Index gave the award for the nation’s most consistent market to the suburb of Charlestown in the Lake Macquarie LGA which sits beside Newcastle. It has sold between 73 and 88 homes per quarter over the past three years. The median house price rose 10.4 percent in the past 12 months to $530,000.</p>
<p>Which brings me to one of the unsung markets of capital city Australia, Adelaide. One the hallmarks of the Adelaide residential market is consistency.</p>
<p>While the generalised price growth numbers have been fairly moderate, Adelaide markets have had busy sales activity in recent years - and a standout feature is the number of locations with consistent sales activity.</p>
<p>The Tea Tree Gully LGA continues to stand out as precinct with lots of suburbs marked by consistent sales performance.</p>
<p>They include Greenwith (median price $440,000), which won our vote as the nation’s most consistent suburban market in a previous edition of The Price Predictor Index. Quarterly sales in Greenwith over the past four years have been 51, 58, 56, 42, 53, 45, 43, 43, 44, 45, 49, 46, 51, 47 and 41.</p>
<p>And, as another indicator that this kind of consistency produces solid price growth, the median price for Greenwith has increased 8 percent in the past 12 months and 16 percent in the past three years.</p>
<p>The Onkaparinga LGA in the far south of the Adelaide metropolitan area is a frequent entry in our Hotspots reports, with its mix of coastal suburbs, new growth areas and wine country, boosted by improved road and rail links to central Adelaide.</p>
<p>Onkaparinga has many consistent performers, including Happy Valley and Morphett Vale (where quarterly sales have been 140, 142, 140, 124, 142, 137 and 135 over the past two years). Happy Valley’s median price has risen 6 percent to $380,000 in the past 12 months.</p>
<p>In the downmarket northern suburbs of Adelaide, both Salisbury and Salisbury North are very consistent markets. Salisbury (median house price $285,000) has recorded quarterly sales of 47, 49, 44, 54, 40, 42, 43, 43, 38 and 45 over the past 2-3 years.<span style="font-size: 12.16px;"> </span></p>
<p>And at the more prestige end of the market, North Adelaide (median house price $1.04 million) had delivered sales of 58, 56, 56, 55, 64, 59, 57, 48 and 56 in the past couple of years.<span style="font-size: 12.16px;"> </span></p>
<p>Australia abounds with markets like these, suburbs and towns that show great consistency in their level of sales. For investors who have patience and value steadiness, they’re good places to park your money.</p>
<p class="p1"><span class="s1">T<em>erry Ryder is the founder of </em><a href="https://www.hotspotting.com.au/"><span class="s2"><em>hotspotting.com.au</em></span></a><em>. You can  </em><a href="mailto:%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20var%20prefix%20=%20'ma'%20+%20'il'%20+%20'to';%20var%20path%20=%20'hr'%20+%20'ef'%20+%20'=';%20var%20addy38821%20=%20'ryder'%20+%20'@';%20addy38821%20=%20addy38821%20+%20'hotspotting'%20+%20'.'%20+%20'com'%20+%20'.'%20+%20'au';%20document.write('%3Ca%20'%20+%20path%20+%20'/''%20+%20prefix%20+%20':'%20+%20addy38821%20+%20'/'%3E');%20document.write(addy38821);%20document.write('%3C//a%3E');%20//--%3E/n%20%3C/script%3E%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3Cspan%20style=/'display:%20none;/'%3E');%20//--%3E%20%3C/script%3EThis%20email%20address%20is%20being%20protected%20from%20spambots.%20You%20need%20JavaScript%20enabled%20to%20view%20it.%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3C/');%20document.write('span%3E');%20//--%3E%20%3C/script%3E"><span class="s2"><em>email him</em></span></a><em> or follow him on </em><a href="https://twitter.com/hotspotting"><span class="s2"><em>Twitter.</em></span></a></span></p>
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Nation’s most consistent market is Charlestown, New South Wales

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<div>Total construction work done declined by 0.7 percent in seasonally adjusted terms to $46.4 billion over the first quarter of the calendar year to be 7.2 percent lower over the year to March 2017. </div>
<div> </div>
<div>After weaker trade and retail figures, all of the signs appear to be pointing to a weak result for GDP growth in the first quarter. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/05/26/A1.jpg" target="_blank">Click to enlarge</a></p>
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<p> </p>
<div>First, here's the good news: having peaked all the way back in 2012, engineering construction activity is now rising again. </div>
<div> </div>
<div>There were still moderate ongoing declines in Western Australia and the Northern Territory as resources construction activity continues to wind down, but the rates of these declines is now tapering off.</div>
<div> </div>
<div>And indeed, at the national level engineering construction activity is rising again, partly driven by infrastructure projects in the three most populous states. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/05/26/A2.jpg" target="_blank">Click to enlarge</a></p>
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<p> </p>
<div><strong><span style="text-decoration: underline;">Dodgy weather...or peak resi?</span></strong></div>
<div> </div>
<div>Residential building work done dropped by 4.7 per cent in the quarter, which was the worst quarterly result for the sector since the introduction of the Goods and Sales Tax (GST) more than a decade and a half ago. </div>
<div> </div>
<div>Building activity slowed across new house building, apartments, and major renovations, suggesting that at least part of the reason for the decline was Cyclone Debbie towards the end of the quarter, while Sydney also had some shocking weather during the period. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/05/26/A3.jpg" target="_blank">Click to enlarge</a></p>
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<p> </p>
<div>And looking at the building work done figures by state confirms as much, with a very sharp 10 per cent quarterly drop in Queensland, and a somewhat lesser 4 per cent decline in New South Wales. </div>
<div> </div>
<div>In Victoria building activity powered to a new record high in chain volume measures terms, with the industry going like the clappers in Melbourne and operating at close to full capacity. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/05/26/A4.jpg" target="_blank">Click to enlarge</a></p>
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<p> </p>
<div>New detached house construction has been broadly flat since the end of 2014, with the growth in residential construction since that time driven by record activity levels in the apartments sector.</div>
<div> </div>
<div>Here too there was a sharp weather-related 22 per cent fall in Queensland, plus a relatively small decline in New South Wales.<br><br>But there was also a slowdown in evidence in Western Australia, South Australia, the Northern Territory, and Canberra. </div>
<div> </div>
<div>On this evidence, then, it's possible that the peak for apartment construction activity might have passed, although there is of course still a huge pipeline of work to be completed.  <br><br>
</div>
<div>Click to enlarge</div>
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<p><br><strong><span style="text-decoration: underline;">The wrap</span></strong></p>
<div> </div>
<div>Firstly, growth in the economy in the first quarter is going to be weak, and perhaps very weak. </div>
<div> </div>
<div>On the positive side there is light at the end of the tunnel for the resources states, as engineering construction activity finally looks to be bottoming out, after years of contraction. </div>
<div> </div>
<div>Strip out the impact of Cyclone Debbie and heavy rain in Sydney and the apparently sharp drop in residential construction in the first quarter of the year may prove to be less than dramatic. </div>
<div> </div>
<div>However, it's hard to escape the conclusion that building activity in the residential sector is about to fade away as the record pipeline of apartments is delivered to the market. </div>
<div> </div>
<div>It might reasonably be expected that dwelling starts fall by about a quarter over the next couple of years. </div>
<div> </div>
<div>Given the huge level of employment in the construction industry, this could prove to be a very significant drag on the economy going forward. </div>
<p> </p>
<p><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
<p><em> </em></p>
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pwargent-M4siyDbqQY

Mining cliff over, what next for the residential market? Pete Wargent

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<p>Most people jump into markets when they hear they’re booming. Few will buy in a down market, with an eye to the future.</p>
<p>They’ll wait until a newspaper report tells them prices have jumped in the past year, which means they’re too late to maximise the best opportunities to buy well.</p>
<p>Perth is the most depressed of the capital city markets and buyers are staying away in droves. The real estate industry is working hard to talk up the market, claiming buyers should dive in before prices rise. Such claims are among real estate’s greatest clichés, but they will be right in the not too distant future – at the right time Perth will represent great buying, after 3-4 years of falling prices. But most won’t make a move until they read there’s a new boom on.</p>
<p>Another example of this conundrum is provided by Townsville. The North Queensland city has had a lot of negative publicity recently and you wouldn’t buy there on the current numbers.</p>
<p>But I rate locations on their future prospects, often in defiance of the current situation, to alert investors to areas poised for growth. Townsville is a classic case.</p>
<p>It’s among the sturdiest regional economies in Australia. I rate economic diversity and Townsville has more than most regional centres, with strong elements of government admin, education, defence, resources, health, tourism and manufacturing – plus an export port.</p>
<p>Its property market had a run of strong annual growth up to 2011 – and, after decline in the past few years, is ready to resume its forward progress. Its comeback will be boosted by major events, including retail projects, CBD commercial and infrastructure spending. It is also receiving economic impetus from the expansion of its military economy and will benefit from the $22 billion Adani mining project.</p>
<p>Townsville is forecast to be one of Australia’s fastest-growing cities, reaching a population of 340,000 by 2050, according to demographer Bernard Salt in a 2015 report.</p>
<p>Townsville has over 100 education facilities, including the James Cook University, where around 12,000 students are enrolled.</p>
<p>It’s close to the Barrier Reef and tourism is a big industry. The city received 1.2 million domestic visitors in the year to September 2016, injecting $925 million (up 35 percent on the previous year). Around 12,000 cruise ship passengers visit Townsville each year and, following a Cruise Ship Terminal upgrade, larger numbers are expected in the future.</p>
<p>Trade through the Port of Townsville often tops one million tonnes per month and it is now Queensland’s third largest port. Examples of the port’s growth include an $85 million export facility opened by Glencore in 2015 and Puma Energy’s $150 million fuel import terminal.</p>
<p>The Townsville house market was one of the strongest among the Queensland regional cities over the five years to 2011, with median prices rising 50 percent. In recent years, there have been few signs of growth and many suburbs remain in decline as a result of recent economic reversals.</p>
<p>News of Clive Palmer’s nickel refinery closing in 2016 has not helped the market.</p>
<p>But Hotspotting expects an economic revival in 2017 and better results in the property market, a sentiment shared by Herron Todd White. In the October 2016 edition of its In Focus report, HTW said conditions in the residential market were starting to stabilise.</p>
<p>A core problem for Townsville has been oversupply, bringing an adjustment in rents. Despite that, yields remain attractive and are generally in the 5-6 percent range for houses. Some of the unit markets have median yields close to 7 percent.</p>
<p>So it’s a good time to consider Townsville as it gears for a growth phase. Job-generating projects are set to get under way in 2017, headed by a $1.9 billion CBD makeover. The Townsville City Waterfront Priority Development Area plan is designed to create a modern city space where 30,000 people are expected to be living and working in the CBD by 2030.</p>
<p>New developments will include bars, restaurants and shops. This will also be the site of a sports stadium, convention centre, arts precinct and a redevelopment of the North Yards railway sheds.</p>
<p>Townsville will thrive on the Adani coal project, which will have its HQ in Townsville, if the miner’s undertakings are kept. But nothing is certain in the resources sector and Townsvillemay have to fight to maximise the benefits because other regional cities can sniff the opportunities. Hence this headline in the local paper on 10 February: “Townsville declares war on Rocky.”</p>
<p>In a story on the front page of the Townsville Bulletin, Townsville Mayor Jenny Hill said the gloves were off in beating out other regional cities for Adani's FIFO hub.</p>
<p>Townsville is likely to benefit from other mining activity in Central Queensland, despite being hundreds of kilometres from the mine sites, in many cases. As one example of how major mining companies approach staffing these days, reports suggest BHP Billiton “has turned to Townsville locals to fill 200 fly-in, fly-out jobs in the Bowen Basin”.</p>
<p>There are 270 jobs on offer at the company’s Peak Downs and Saraji mines near Moranbah and a spokesman for BHP Billiton Mitsubishi Alliance (BMA) says they are advertising FIFO roles from Townsville.</p>
<p>Townsville is also likely to benefit from plans for Singaporean Armed Forces to train at Shoalwater Bay Training Area and Townsville Field Training Area. Up to 14,000 Singapore personnel will conduct unilateral army training for up to 18 weeks a year by 2021. Land will be used for tank training and $300 million will be spent on new facilities. This is the plan that became contentious recently when rural landholders claimed their properties would be forcibly resumed to make way for the military manoeuvres.</p>
<p>Then there’s a $225 million solar farm planned in the Upper Ross, with the project attracting federal funding and a solar power purchase agreement reported to be the biggest in the country. Under a 13-year contract, EnergyAustralia will buy 80 per cent of the electricity generated by the 142MW facility, enough power for 52,000 homes.</p>
<p>With so many large-scale projects in its future, Townsville is poised to return to growth and tuned-in investors will be looking around for opportunities.</p>
<p class="p1"><span class="s1">T<em>erry Ryder is the founder of </em><a href="https://www.hotspotting.com.au/"><span class="s2"><em>hotspotting.com.au</em></span></a><em>. You can  </em><a href="mailto:%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20var%20prefix%20=%20'ma'%20+%20'il'%20+%20'to';%20var%20path%20=%20'hr'%20+%20'ef'%20+%20'=';%20var%20addy38821%20=%20'ryder'%20+%20'@';%20addy38821%20=%20addy38821%20+%20'hotspotting'%20+%20'.'%20+%20'com'%20+%20'.'%20+%20'au';%20document.write('%3Ca%20'%20+%20path%20+%20'/''%20+%20prefix%20+%20':'%20+%20addy38821%20+%20'/'%3E');%20document.write(addy38821);%20document.write('%3C//a%3E');%20//--%3E/n%20%3C/script%3E%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3Cspan%20style=/'display:%20none;/'%3E');%20//--%3E%20%3C/script%3EThis%20email%20address%20is%20being%20protected%20from%20spambots.%20You%20need%20JavaScript%20enabled%20to%20view%20it.%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3C/');%20document.write('span%3E');%20//--%3E%20%3C/script%3E"><span class="s2"><em>email him</em></span></a><em> or follow him on </em><a href="https://twitter.com/hotspotting"><span class="s2"><em>Twitter.</em></span></a></span></p>
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Tuned in investors turning towards Townsville

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<div id="post-body-8296077642061233663" class="post-body entry-content">
<div>Strewth, you know things haven't been hunky dory for housing markets in your region when the central bank starts profiling financial stability risks in its bi-annual Review. </div>
<div> </div>
<div>Housing loan arrears continue to deteriorate in the mining regions of Western Australia and Queensland.</div>
<div> </div>
<div>I have actually heard much about this already from various sources - in some small mining towns the situation is beyond chronic - but now it's starting to feed through to the official data.</div>
<div> </div>
<div>Interestingly, nationally applications for property possession are still declining as a share of the total dwelling stock. </div>
<div> </div>
<div>But clearly this is not the case in mining hotspots. </div>
<div> </div>
<div>High vacancy rates, falling rents, and falling prices are hammering property investors in mining regions, reported the Reserve  Bank of Australia (RBA).</div>
<div><strong><span style="text-decoration: underline;"> </span></strong></div>
<div><strong><span style="text-decoration: underline;">Illiquidity</span></strong></div>
<div> </div>
<div>Banks have reported that in some regions even with big price discounts properties can't be sold.</div>
<div> </div>
<div>The only minor consolation or "cushion" for households in aggregate is that in some of the worst-affected regions mining companies own a high proportion of the dwelling stock, so personal administrations, while rising in mining regions, nationally remain close to 15-year lows.</div>
<div> </div>
<div>Though I doubt this feels like much of a consolation if you're the one stuck with an illiquid and depreciating asset.</div>
<div> </div>
<div>The RBA profiled the Pilbara and the Kimberley region in coastal Western Australia. </div>
<div> </div>
<div>And in Queensland, the RBA took a shufti at Townsville, Mackay, the Bowen Basin, Central Highlands.<br><br>
</div>
<div><a href="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%201.48.45%20PM.png" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%201.48.45%20PM.png" alt=""></div>
<div class="separator">Crikey.</div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Mining crunch stress and house prices

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<p>Investors continue to under-rate and overlook regional Australia despite the appeal of what’s on offer for those who select well and invest intelligently.</p>
<p>There’s a strong inclination to cling to the capital cities, perhaps unsurprising when research sources publish comparisons with a single growth figure to describe the eight capital cities (inflated by Sydney’s growth figure, also inflated) and a single number to describe the vastness that is regional Australia.</p>
<p>The lone figure for regional Australia is always lower, dragged down by all those cities and towns undermined by the decline in the resources sector or drought or some other periodic affliction.</p>
<p>But the best of regional Australia provides one of real estate’s win-win-win situations: lower prices, better yields and strong prospects for capital gains.</p>
<p>Many of the regional centres with the best appeal are places most investors would never consider – or have even heard of.</p>
<p>Armidale in regional New South Wales is a good case study. It features in the new 2017 edition of the <em>National Top 5 Cheapies With Prospects: Regional Edition</em> for multiple reasons. A diverse economy sustained by education, tourism and agriculture is a big factor, as is the support of Deputy Prime Minister Barnaby Joyce, the local Member.</p>
<p>The city’s prospects are being boosted by upgrades to the airport and hospital, the possibility of a major solar farm, touted as being the largest solar farm in New South Wales, and a wind farm development.</p>
<p>There is also the plan for a government department currently based in Canberra being relocated to the township.</p>
<p>Located on the New England Highway inland from Coffs Harbour and with regular train services and daily flights to Sydney, Armidale has good connectivity for both freight and passengers.</p>
<p>In addition to its rural roots, Armidale is a significant education centre. The New England University College began life as a College of the University of Sydney in 1938 - the first Australian university established outside a state capital city. The University of New England now has campuses at Armidale, Lismore and Orange, catering for 22,000 students.</p>
<p>The prominence of the education sector has created a wider range of jobs and business opportunities than normally would be found in a regional location.</p>
<p>Tourism and hospitality play a vital role in the local economy, contributing $92 million in sales in 2015, when 181,000 visitor-nights were recorded by Tourism Research Australia. Canyoning, mountain biking, bird watching, trout fishing and other outdoor adventures attract visitors. There are also spectacular waterfalls, gorges, world-heritage national parks, cool-climate vineyards, music festivals and art exhibitions.<span style="font-size: 12.16px;"> </span></p>
<p>Armidale has not lost its agricultural roots; rural land is used largely for sheep and cattle grazing, with some fruit-growing and viticulture. Sheep and cattle are sold each week at the Armidale Saleyards and around 1.8 million beasts are slaughtered each year. The sheep, beef cattle and grain farming industries employ about 10% of the population.</p>
<p>The region is serviced by the Armidale Hospital - a public hospital which is currently undergoing an upgrade.</p>
<p>The Metz Solar Farm, declared a “state significant project” because of its size, reportedly would be the largest solar development in NSW. Proprietor Infinergy has negotiated a 30-year lease for the land – a 950ha selection. This project would generate 150 construction jobs.</p>
<p>Other infrastructure improvements which will give Armidale a boost include upgrades of the airport. The present airport terminal will double in size.<span style="font-size: 12.16px;"> </span></p>
<p>In a move driven by the Deputy Prime Minister Joyce, 200 public servants could be relocating to Armidale. Staff from the Australian Pesticides and Veterinary Medicines Authority have been told to prepare to relocate under the Federal Government’s “jobs and growth” strategy.<span style="font-size: 12.16px;"> </span></p>
<p>The Armidale median house price is $360,000 following a 6 percent rise in the past 12 months. It’s quite a busy market with over 400 house sales in the past 12 months.<span style="font-size: 12.16px;"> </span></p>
<p>Long-term growth, i.e. the average annual growth in median house prices over the past 10 years, is 5 percent per year for both houses and units.</p>
<p>Investors can expect solid rents to deliver yields in the 5 percent to 5.5 percent range on houses and around 6 percent on units.</p>
<p> </p>
<p class="p1"><span class="s1">T<em>erry Ryder is the founder of </em><a href="https://www.hotspotting.com.au/"><span class="s2"><em>hotspotting.com.au</em></span></a><em>. You can  </em><a href="mailto:%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20var%20prefix%20=%20'ma'%20+%20'il'%20+%20'to';%20var%20path%20=%20'hr'%20+%20'ef'%20+%20'=';%20var%20addy38821%20=%20'ryder'%20+%20'@';%20addy38821%20=%20addy38821%20+%20'hotspotting'%20+%20'.'%20+%20'com'%20+%20'.'%20+%20'au';%20document.write('%3Ca%20'%20+%20path%20+%20'/''%20+%20prefix%20+%20':'%20+%20addy38821%20+%20'/'%3E');%20document.write(addy38821);%20document.write('%3C//a%3E');%20//--%3E/n%20%3C/script%3E%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3Cspan%20style=/'display:%20none;/'%3E');%20//--%3E%20%3C/script%3EThis%20email%20address%20is%20being%20protected%20from%20spambots.%20You%20need%20JavaScript%20enabled%20to%20view%20it.%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20document.write('%3C/');%20document.write('span%3E');%20//--%3E%20%3C/script%3E"><span class="s2"><em>email him</em></span></a><em> or follow him on </em><a href="https://twitter.com/hotspotting"><span class="s2"><em>Twitter.</em></span></a></span></p>
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Armidale investments being overlooked

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<p>Hotspotting’s Dirty Dozen – the 12 worst places to invest in Australia – has for a long time been dominated by markets closely linked to the resources sector. </p>
<p>The latest batch – included in the new edition of <em>The Price Predictor Index</em> – has a different flavour. Half of the locations are suburban markets, with considerably less dominance by the mining-related centres.</p>
<p>There are two reasons: oversupply has coincided with a decline in sales to turn many city apartment markets no go zones – and there are glimmers of recovery in some of those down-trodden resources locations.</p>
<p>One of the most remarkable emerging news stories right now is the speed of the turnaround in perception, confidence and activity in the resources sector. After 2-3 years of “the resources boom is over” articles, suddenly the news is dominated by rising commodity prices and announcements of new mining ventures or the revival of projects previously mothballed. </p>
<p>This is particularly true in Queensland, where the spectacular rise in the price for coal has changed the mentality of the industry and perceptions about the state economy.</p>
<p>Personally, I wish they’d leave coal in the ground and find better, cleaner ways to make steel or fire up power stations. </p>
<p>But for anyone who owns real estate in places like Mackay, Emerald, Moranbah or Rockhampton in Queensland, as well as the towns of the Hunter Valley in New South Wales, this is seriously good news. There is now genuine hope of vacancy rates coming down and rents and prices rising again.</p>
<p>Consider this from <em>The Courier-Mail</em> on 17 October: “A third Queensland coal mine has announced its ­intention to restart production as demand out of China has pushed the spot price above $US220 a tonne. Cockatoo Coal has emerged from administration with a plan to restart the Baralaba mine early next year. It follows Glencore’s decision to restart production at the Collinsville mine, while Stanmore Coal has taken over the Isaac Plains mine from Vale and Sumitomo and has now settled contracts for November delivery of its semisoft coking coal at $US130 a tonne, which is 75 percent higher than September’s price.”</p>
<p>And this from <em>The Herald</em> in Newcastle on 14 October: “The Hunter coal industry is back on an optimistic footing after big rises in prices both for coking coal for steelmaking and the region’s main product, thermal coal for power stations. In round figures, thermal coal prices are up by about 70 percent on lows earlier this year, while coking coal, which makes up about 15 percent of Hunter output, has effectively doubled. The price increases have led analysts to re-rate most Hunter mines as profitable, whereas a year ago it was widely accepted that two out of three mines were losing money.”</p>
<p>Or this from the <em>Financial Review</em> on 12 October: “The mining industry has reached an agreement with Japanese steel makers that prices for most Australian coking coal will jump 117 percent in just three months, an increase that means that the benefit of rising prices could be felt across the economy. The agreement means most Australian coking coal will be sold for $US200 per tonne over the next three months, compared with $US81 per tonne in the March quarter. The boom in coal prices could add 2 percent to national income this year, boost Federal Budget revenues by close to $7 billion and start wages growing again. Less than a year after the coal industry was accused of being in terminal decline, shuttered mines across Queensland and NSW have been reopened.”</p>
<p><em>Business Insider</em> reported on 17 October: “With just over two months to go, it appears that 2016 could well be an important turning point for Australia’s mining sector. Commodity prices have recovered, the downturn in capital investment appears to be nearing its end and there are even some signs of a pickup in non-mining infrastructure investment, which is helping to boost sentiment after years of depressing, capital-destroying developments. For an economy that’s still highly-dependent on the mining sector, it’s been welcome news.”</p>
<p>What a startling difference in the rhetoric is so short a space of time.</p>
<p>There are all kinds of implications for economies and government budgets, but also for real estate in affected areas.</p>
<p>For those long-suffering investors who have been agonising over whether to cut their loses and get out of badly-performing properties in places like Gladstone in Queensland and Newman in Western Australia, there is now some hope that hanging on will deliver, in time, a reasonable outcome.</p>
<p><em>Terry Ryder is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></em></p>
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