Simon Pressley

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GUEST OBSERVATION
Depending on the time of the purchase, an investor would have experienced capital growth three times that of capital cities or lost over $300,000. It’s all in the timing!
While the property market of Queensland’s capital city is currently performing strongly, falling commodity prices has been the primary cause for property markets in traditional mining towns to experience double digit declines in value. The biggest pain has been felt in the central Queensland shire of Isaac, which consists of Moranbah and Dysart.
A typical house was worth $580,000 in December 2012 and has since declined in value to $237,500 over the next two years (a decline of 36% per annum). At the peak of the market in 2012, houses were rented for $1,350 per week. Today that same property would be rented for $320 per week.
Emerald median values have declined by an average of 15.3% per annum over the last two years. Rental vacancy rates in Emerald are currently over 8% so rents have fallen from $700 per week (2012) to $270 per week.
The regional hub of Mackay provides a majority of goods and services to the coal face. In addition to a 33% reduction in coal prices over the last two years, Mackay has built more properties than demand required. Median property values have declined by an average of 3.0% per annum over the last two years. Rents have fallen from $500 per week to $380 per week.
In the far north west of the state, Mount Isa median values have remained unchanged. Mount Isa has a diverse range of minerals which it mines whereas central Queensland is predominantly coal. Meanwhile, Brisbane median property values have increased by an average of 6.6% per annum over the last two years.
<img src="/images/2015/04/07/MiningTowns_Qld.jpg" alt="">
In spite of Queensland’s recent mining town doldrums, the fact of the matter is that these markets have (significantly) outperformed Brisbane over the long-term. Astute investors would be aware that property is a long-term asset class.
Over the fourteen years since the turn of the century, which includes the recent downturn, Moranbah’s median property value has grown by an average of 14.8% per annum compared to Brisbane’s 7.8%. Emerald (10.9% per annum), Mount Isa (8.5%) and Mackay (8.5%) have also performed better than the state’s capital city.
It wasn’t that long ago when the likes of Brisbane, Gold Coast, and Sunshine Coast were having downturns of their own and the mining towns were setting record highs.
Investing in these locations is not for the faint-hearted. ‘Timing’ is significantly more important when investing in locations where specific industries have such a significant impact on demand for housing. Often, the smart decision is to do the opposite to what the masses are doing. In the words of the world’s most famous investor, Warren Buffet: “The time to be fearful is when everyone else is greedy. The time to be greedy is when everyone else is fearful."
A sophisticated property investor who purchased in Moranbah in late 2004 would have paid $150,000 for a 3-bedroom house. Even with the recent downturn, the current value of $237,500 still represents 4.7% average annual growth over the last ten years, which is only slightly below Brisbane’s 5%.
An investor who did purchase in Moranbah in 2004 and sold at the market peak of $580,000 in late 2012 would have made a massive 18.4% average annual growth over those eight years. That’s roughly three times better than what anyone could have achieved in any capital city. Let me spell it out for you. A $15,000 deposit (10%) paid on a Moranbah property in 2004 would have become $430,000 equity over eight years. Extraordinary!
On sheer numbers alone, one could argue a very good case that now is a good time to buy in Moranbah. An investor could pick the best property of the litter with no real competition, pay only $240,000, and rent it out for $320 per week. That 7.2% rental yield is far superior to anything that any capital will offer.
Our research suggests that an upswing in coal-related locations is on the horizon. Lower labour costs and the Australian dollar has improved the viability for mining giants such as BHP and Rio Tinto.
There are multiple new mining projects in the approval pipeline throughout Queensland and the Hunter Valley. The untapped Galilee Basin is the biggest coal province in the world. Our research has calculated five large mines with combined project values of $53 billion having potential for up to 31,500 new jobs if they all proceed. Emerald, Mackay and Brisbane will be the biggest beneficiaries.
At the peak of the mining construction boom two years ago, for every one job at the coal face in central Queensland there were nine management and administration jobs in Brisbane’s CBD.
Emerald
<ul>
<li>Median value increased by 10.9% per annum over the last 14 years, significantly more than Greater-Brisbane’s 7.8% per annum</li>
<li>22% decline during 2014 calendar year</li>
<li>Median rents have declined from $700 per week in September 2012 to $270 per week now</li>
<li>Vacancy rates currently 8.2%</li>
<li>Median value of a 3-bedroom house today is $319,500 and it would rent for $320 per week (5.2%)</li>
</ul>
<img src="/images/2015/04/07/Emerald_PropertyMarket_1990-2014.jpg" alt="">
Mackay
<ul>
<li>Median house value declined 5.8% during 2014</li>
<li>Median value increased by 8.5% per annum over the last 14 years, significantly more than Greater-Brisbane’s 7.8% per annum</li>
<li>50% fewer properties sold last year compared to its 2012 peak</li>
<li>Median rents have declined from $500 per week to $380 per week over last two years</li>
<li>An overzealous construction industry has contributed as much to the current subdued market as the falling coal prices</li>
</ul>
<img src="/images/2015/04/07/MtIsa_PropertyMarket_1990-2014.jpg" alt="">
Mount Isa
<ul>
<li>Median value increased by 8.5% per annum over the last 14 years, significantly more than Greater-Brisbane’s 7.8% per annum</li>
<li>Median rents have declined from $540 per week in September 2012 to $500 per week now</li>
<li>Vacancy rates currently 3.5%</li>
<li>Diverse range of commodities in the region, whereas central Queensland is predominantly coal and gas</li>
<li>Median value of a 3-bedroom house today is $319,500 and it would rent for $320 per week (5.2%)</li>
</ul>
<img src="/images/2015/04/07/MtIsa_PropertyMarket_1990-2014.jpg" alt="">
Moranbah
<ul>
<li>Median value increased by 14.8% per annum over the last 14 years, significantly more than Greater-Brisbane’s 7.8% per annum</li>
<li>Someone who purchased at the peak in late 2012 would have paid $580,000 for a house and received $1,350 per week rent. That property today would be worth $237,500 and be rented for $320 per week</li>
</ul>
<img src="/images/2015/04/07/Moranbah_PropertyMarket_1990-2014.jpg" alt="">
Brisbane
<ul>
<li>Greater-Brisbane’s median property value has increased 7.8% per annum over the last 15 years</li>
<li>Median house rents have increased from $430 per week in September 2012 to $450 per week now</li>
</ul>
<img src="/images/2015/04/07/Brisbane_PropertyMarket_1990-2014.jpg" alt="">
Simon Pressley is managing director of Propertyology, a REIA Hall Of fame Inductee, property market analyst, accredited property investment adviser, and Buyer’s Agent. 
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology works exclusively with property investors</a> to purchase properties in strategically chosen locations all over Australia.
Photo of Mount Isa <a class="mw-mmv-license" href="https://www.propertyobserver.com.au/https://creativecommons.org/licenses/by-sa/2.5" target="_blank" style="font-size: 12.1599998474121px; line-height: 1.3em;">CC BY-SA 2.5</a>.
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spressley-sBoeMhannA

Mining towns outperform capital city - but timing is critical: Simon Pressley

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GUEST OBSERVATION
The Australian Bureau of Statistics has just released its annual update on regional population growth. The combined growth of Australia’s capital cities of 1.9% for the year ending 30 June 2014 is above the national growth rate of 1.6%. I’ve analysed the data of Australia’s 550 local government authorities to find the population hotspots.
<img src="/images/2015/04/07/Aust_PopulationGrowth_2013-14.JPG" alt="">
At a greater capital city level, Perth continues its status as Australia’s fastest growing city with a growth rate of 2.2%. Perth recently became Australia’s fourth city with a population in excess of 2 million people.
Melbourne and Darwin both had growth rates of 2.2%, ahead of Sydney (1.8%) and Brisbane (1.7%). Canberra (1.2%), Adelaide (1.0%) and Hobart (0.6%) continue their trend of being Australia’s slowest growing capital cities.
Of more interest is some of the data at local government level. The fastest growing population in Australia last year was the shire of Serpentine-Jarrahdale, at the southern urban footprint of Perth. With a population of 22,698 its rate of growth for the year was 6.2% - more than three times the national average.
The south-west Sydney shire of Camden was a close second with a growth rate for the year of 6.1%.
Casting our eyes across the nation revealed these other population hotspots:
<ul>
<li>The regional standout was Busselton, in the far south of Western Australia with a growth rate 3.7%, followed closely by the central Queensland industrial powerhouse of Gladstone with 3.5%; 
</li>
<li>The famous Western Australia wine region of Augusta-Margaret River experienced a 3.4% population growth (twice the Australian average) while the gas city of Karratha in the state’s north grew by 2.9% over the year; 
</li>
<li>While South Australia’s total population growth was only 1%, regional towns Gawler (2.8%) and Mount Barker (2.1%) produced surprising results; 
</li>
<li>A thirst for higher density living in Sydney drove population growth in Botany Bay (3.4%), Canada Bay (3.0%), Strathfield and Parramatta (both 2.9%); 
</li>
<li>Regional New South Wales towns of Yass Valley (2.3%) and Maitland (2.2%) were well above the national average; 
</li>
<li>Victoria’s population growth numbers is consistent with its urban sprawl strategy. Wyndham (outer-south-west 5.6%), Whittlesea (outer-north 4.4%), Melton (outer-west 4.0%), and Cardinia (south-east 3.6%) all produced big numbers. 
</li>
<li>The historic goldfields town of Ballarat with a population of 100,000 produced 1.7% growth; 
</li>
<li>In Queensland, Somerset (3.0%), Scenic Rim / Beaudesert (2.9%), and Ipswich (2.8%) were strong. The population of Australia’s single biggest local government, Brisbane City Council, grew by 1.5%</li>
</ul>
Simon Pressley is managing director of Propertyology, a REIA Hall Of fame Inductee, property market analyst, accredited property investment adviser, and buyer’s agent.
 <a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology works exclusively with property investors</a> to purchase properties in strategically chosen locations all over Australia.
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Australia's population hotspots: Simon Pressley

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GUEST OBSERVATION
Psst... Got a second? I’d like to let you know of an exciting property market location which is the second biggest regional city in its state, is the principle service centre for a region which is in close proximity to large and very valuable reserves of natural resources, it has critical deep sea port infrastructure in place, one of the highest rental yields in the country, its historical return on investment is close to double that of the capital city average, and a property entry price of $300,000. 
Every single word in the above opening paragraph is true, although – intentionally – the name of the location isn’t mentioned. If I said it was a bayside suburb in a capital city the odds are that this would instantly become Australia’s biggest hotspot. Now that I reveal that it is the South Australian regional city of Whyalla many people reading this will suddenly become uncomfortable.
I can think of no better example to illustrate how emotionally-based perceptions, as opposed to solid research and logic, get in the way of property investors standing to make the most of their hard-earned money.
From my desktop, I can hear people shouting: “But Simon, Whyalla is a mining town! Regional locations are high risk compared to capital cities.”
Whyalla is actually a steel manufacturing town (18% of jobs are in metal manufacturing). It services inland mines (lots of them). Whyalla is a seaport located on the east coast of the Eyre Peninsula. Tourism is a small secondary industry.
<img src="/images/2015/03/26/MedianValues_Capitals_5yrs-15yrs.jpg" alt="">
Mining giant, BHP established Whyalla in 1901 to facilitate the transport of iron ore from mines in the state’s north, via sea, to processing plants. A blast furnace was constructed in the 1940's and Whyalla's reputation as the 'steel city' grew.
Through the 1940s, 1950s and 1960s, Whyalla's population expanded rapidly and governments began planning for a 100,000 population. Shipbuilding had become the main industry until international competition forced its closure in 1978. The steel plant has evolved through peaks and troughs under BHP, then One Steel, and now Arrium. The one constant has been its status the biggest employer.
A mineral exploration boom unfolded throughout the last decade resulting in increased population. In 2000, an educated property investor would have paid a mere $80,500 for a house in Whyalla. An outer-suburbs capital city house back then would have cost $100,000 more than that. Over the next fifteen years Whyalla produced solid growth (an average of 9.5% per annum). The capital city average over the same fifteen year period was considerably less (7.3% per annum) and included three to four years of negative growth.
Do you want to re-evaluate that earlier comment about “risk”? Perhaps, you might be starting to see my point about “perception” and lost opportunity.
<img src="/images/2015/03/26/Whyalla_PropertyMarket.jpg" alt="">
The infrastructure in Whyalla is well established; as one should expect of a century old city with 22,000 people. University of SA has a campus in Whyalla, offering programs such as business, health, and community services. Daily flights to Adelaide are available with Regional Express; Qantaslink is also looking to service the region from 2015.
Three hours north of Whyalla is Olympic Dam. Opened in 1988, Olympic Dam holds some of the biggest reserves of copper, gold, uranium, and silver in the world. State and federal government approvals were granted to BHP for a $30 billion expansion in October 2011. In September 2012, BHP suspended the project, although it is widely expected that a scaled-down expansion will proceed at some point.
<img src="/images/2015/03/26/Whyalla.jpg" alt="">
Whyalla already has deep sea port infrastructure at Port Bonython which is very likely to come in to play when BHP eventually find the most viable development model. When it does, Whyalla’s property market will, yet again, perform much stronger than capital cities.
Whyalla’s property market is currently flat. Then again, so are most markets across Australia. An investor could buy a solid three-bedroom house in Whyalla today and get change from $300,000; rental yields are over 6%. Risk? I’d suggest there is considerably more risk investing in an inner-city apartment in <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/2015-02_Propertyology_SydneyOutlook.pdf">Sydney</a> or <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/2015_01_Propertyology_MelbourneOutlook.pdf">Melbourne</a>.
But, then again, I guess that depends on whether one bases things on perception or solid research and logic!
Simon Pressley is managing director of Propertyology, a REIA Hall Of fame Inductee, property market analyst, accredited property investment adviser, and buyer’s agent. 
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology</a> works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.
Photo of Whyalla courtesy of Wikimedia Commons.
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The regional city that has outperformed all capital cities for 15 years: Simon Pressley

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GUEST OBSERVATION
With a population of approximately 170,000 people, Toowoomba is Australia’s second largest, non-coastal city, behind Canberra. It is the only zone in South East Queensland not to experience population growth above the national average over the last decade.
While its property market has teased with glimpses of green shoots every so often Toowoomba mostly underperformed over the last decade.
Situated 700 metres above sea level on the Great Dividing Range, ‘The Garden City’ is among rich volcanic soils. With agriculture among its economic mix, prolonged drought adversely affected the region for a few years, although new infrastructure has subsequently improved water security.
The city is a well established service centre for the Darling Downs agriculture industry, the expanding coal and gas industry in the Surat Basin, and the army aviation centre at Oakey. Toowoomba is also somewhat of an education hub with the well-funded South Queensland University, a few small university campuses and quality private schools.
A new, <a href="https://www.facebook.com/Propertyology" target="_blank">international-scale airport</a> officially opened in November 2014. This significant piece of transport infrastructure has the potential to <a href="https://www.propertyology.com.au/understanding-asian-century-key-to-success/" target="_blank">open up the region’s economy</a>. Qantas has already committed to a dozen flights per week to and from Sydney
Construction of the Wellchamp business park is currently underway and there is also a proposal for a nearby aviation school. $500 million is to be invested in expansion of retail facilities.
The tender for the <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/2014_09_Propertyology_MainEmploymentSectors_web.pdf" target="_blank">$1.5 billion Second Range Crossing</a> project is due to be announced early in 2015; construction should start shortly thereafter. This will significantly improve general public access between Brisbane and Toowoomba and significantly improve road freight safety and commute times.
Up and down housing supply from year to year has tended to keep pace with demand overall. <a href="https://www.propertyology.com.au/your-results/" target="_blank">Our research</a> suggests areas where new supply will be concentrated most include Highfields, Gowrie, Glenvale, and Westbrook.
<img src="/images/2015/02/25/Toowoomba_SupplyDemand_2006-2014.jpg" alt="">
Toowoomba is positioned along a national inland freight corridor and the proposed Melbourne-Brisbane inland port. Private and government investment <a href="https://www.propertyology.com.au/more-than-a-buyers-agent/">provides opportunities</a> for economic growth in tourism, agricultural, aviation, warehousing and logistics.
Simon Pressley is managing director of <a href="https://www.propertyology.com.au/more-than-a-buyers-agent/">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014).
Photo courtesy of Porjo/ <a class="mw-mmv-license" href="https://creativecommons.org/licenses/by-sa/3.0/" target="_blank" style="font-size: 12.1599998474121px; line-height: 1.3em;">CC BY-SA 3.0</a>.
<h2><a href="component/content/article?id=39635" target="_blank">How to purchase high-performing investment properties: a free Propertyology eBook</a></h2>
 
 
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Toowoomba has underperformed, but new infrastructure is promising: Simon Pressley

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GUEST OBSERVATION
Our reading of key metrics suggests that Perth property values are likely to end this year a below where they started the year. Sadly, the news doesn’t get any better.
Sales volumes peaked two years ago and the numbers since have steadily declined. REIWA has reported the latest vacancy rate for Greater Perth at 4.2%, making it easily the highest of all Australian capital cities. Put simply, neither property values nor rents have any pressure currently being applied.
As shown in this graphic, the levels of new supply in the pipeline are at record levels so the pressure valve will be released even further as new stock comes on line. Sales listings have increased over the last 12 months by a massive 46% and broke through the 13,000 barrier in December 2014.
<img src="/images/2015/02/26/BuildingApprovals_Style_2014.12.jpg" alt="">
But, the bigger concern for Perth’s market is on the demand side of the equation. Perth’s impressive run as the nation’s leader in population growth stakes has ground to a halt.
76% of Western Australia’s total population live in the state’s capital (the highest concentration rate in Australia).
<img src="/images/2015/02/26/Population_GrowthRate_2014.06.jpg" alt="">
There has been a sharp decline in the number of people relocating to WA (that is, Perth) over the last 12-18 months. The latest figures released by Australian Bureau of Statistics (ABS) shows a net overseas migration figure of 3,384 for the June 2014 quarter; well below the 10,201 average for the previous three comparative periods.
<img src="/images/2015/02/26/PropertyEconomy_2014.12.jpg" alt="">
As shown above, interstate migration has also been in decline. During 2011 to 2013, a net 2,000 people would typically relocate to WA from other states every quarter. The latest ABS data shows that a net 33 people left WA; the first time that the state has produced a negative figure since June 2003. To describe demand for extra accommodation as ‘easing’ is a gross under-estimate.
When we took a closer analysis of Perth’s economy to see where future demand might come from things look dull.
Iron ore plays a hugely important role in WA’s economy, accounting for 20% of the State’s total revenue and employing more than 61,000 people directly in 2013-14. Iron ore prices have fallen 50% over the last 3 years, hitting state government revenues hard and resulting in its first budget deficit in 15 years ($1.3 billion in 2014 and estimated to be a further $900 million in 2015).
While there are many mining jobs are in the state’s north, most of them live in Perth. 10,000 employees currently working on the Gorgon liquefied natural gas project and Roy Hill iron ore mine will be looking for new jobs once construction is completed later this year. The scenario will be the same for a further 6,000 workers on the Wheatstone LNG project that is set to be completed in 2016.
In spite of lower iron ore prices, mining heavy weights Rio Tinto and BHP have ramped up production. There is a school of thought that this is a strategic choice to squeeze out smaller players. There is a suggestion that, once the damage is done, production will be allowed to slow which can only mean job losses. Sentiment on the Perth jobs front is subdued. There’s no sign of new mining projects to support Perth’s engineering muscle.
To the current state government’s credit, there are an unprecedented number of large projects in metropolitan Perth. As shown in this info-graphic, these include the Crown Casino expansion, new sporting stadium, a large entertainment precinct, railway and airport upgrades, hospitals, and highways.
These big projects will ensure that new jobs will continue to be created in Perth. But, the rate of job growth has definitely slowed down and government finances are likely to remain tight for some time.
<img src="/images/2015/02/26/Jobs_Trend_2009-2014.jpg" alt="">
With the most active first home buyer market in the country over the last couple of years the reduction in residents competing for rental stock has resulted in rising vacancy rates. SQM Research lists the highest vacancies in East Perth (6.7%), Yanchep (5.3%), Perth City (5.0%), Darlington (4.8%), West Perth (4.6%), South Perth (4.2%), and East Fremantle (4.0%).
Bottom line, this will be more than a lull for Perth. Something significant will need to come from left field to stimulate housing demand otherwise Perth looks headed for a prolonged slump.
Simon Pressley is managing director of <a href="https://www.propertyology.com.au/" target="_blank">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014).
<h2><a href="component/content/article?id=39635" target="_blank">How to purchase high-performing investment properties: a free Propertyology eBook</a></h2>
 
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Perth is headed for a prolonged slump: Simon Pressley

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GUEST OBSERVATION
Ipswich has one of the fastest growing populations in Australia over the last decade.
When a few marketing jazz words are combined with a low entry price and above-average rental yields, it’s never been difficult for the so-called property guru to attract property investors to Ipswich. But does the region really stack up?
With its vast amounts of developable, cheap land available, Ipswich plays a key role in the <a href="https://www.propertyology.com.au/keep-granny-ditch-the-flat/" target="_blank">state government’s strategy</a> to try and direct population growth away from the coast.
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" width="176">
Population Growth
</td>
<td valign="top" width="158">
2003-2013
</td>
<td valign="top" width="201">
2008-2013
</td>
</tr>
<tr>
<td valign="top" width="176">
 
</td>
<td valign="top" width="158">
(10yrs)
</td>
<td valign="top" width="201">
(Post-GFC)
</td>
</tr>
<tr>
<td valign="top" width="176">
Australia
</td>
<td valign="top" width="158">
1.7%
</td>
<td valign="top" width="201">
1.8%
</td>
</tr>
<tr>
<td valign="top" width="176">
Queensland
</td>
<td valign="top" width="158">
2.4%
</td>
<td valign="top" width="201">
2.1%
</td>
</tr>
<tr>
<td valign="top" width="176">
Ipswich
</td>
<td valign="top" width="158">
4.2%
</td>
<td valign="top" width="201">
3.7%
</td>
</tr>
</tbody></table>
The impact of a relatively large volume of sales of new properties in a developing region creates a distortion between the data for changes in median property values and the real change in property values.
As the graphic below illustrates, dwelling supply and population growth have kept pace with each other. In spite of the regular hotspot rhetoric that Ipswich cops from time to time, its property market performance has in fact been quite underwhelming.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2015/01/27/Ipswich_SupplyDemand_2006-2014.jpg" alt="">
With a traditional blue-collar demographic, successive state governments and the Ipswich City Council have had to work hard to create sufficient jobs for its growing population.
The award-winning Springfield masterplanned community has been developed over the last decade as a satellite city - Brisbane’s version of Parramatta.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2015/01/27/Ipswich_GreenfieldMap.jpg" alt="">
Already with a new hospital, business park, and railway line, Springfield currently has several good projects in the pipeline. These include a $50 million expansion of the University of Southern Queensland, $70 million headquarters for GE, $80 million Mater hospital, $100 million Brookwater resort and plans to further extend the Orion shopping centre.
The existing Amberley RAAF base has also been spoken about as an anchor tenant for a potential aeronautical precinct.
Investors could do worse than Ipswich, although it is far from our first preference. With so much land flagged for development, expect to see significant new supply, mostly concentrated around Springfield, Ripley, and Redbank Plains.
There is currently in the vicinity of $275 million in house and land packages currently under construction. The Springfield Land Corporation has also just announced a proposal to develop 10,000 new apartments.
Simon Pressley is managing director of <a href="https://www.propertyology.com.au/" target="_blank">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014).
Picture courtesy of Clarebear/ <a class="mw-mmv-license cc-license" href="https://www.propertyobserver.com.au/https://creativecommons.org/licenses/by-sa/3.0" target="_blank">CC BY-SA 3.0</a>.
 
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How the Ipswich region stacks up: Simon Pressley

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GUEST OBSERVATION
While there may still be a bit of steam left in Sydney’s property engine, I previously described Sydney’s market fundamentals as being <a href="https://www.urban.com.au/expert-insights/32249-sydney-s-property-market-is-a-house-of-cards&amp;sa=U&amp;ei=2jXZVILtFaTimAXd6YL4CA&amp;ved=0CAYQFjAA&amp;client=internal-uds-cse&amp;usg=AFQjCNGOaMHa9cv-aCNlZX6KXWHes6-7EQ" target="_blank">as fragile as a house of cards</a>.
A statement in February’s Reserve Bank press release could be a suggestion that a joker in the pack may soon be played.
It is this statement from the RBA that could suggest that policy makers may soon play that joker:
"Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market".
The concerns for Sydney are these:
<ol>
<li>Lack of affordability (long been Sydney’s Achilles heel),</li>
<li>A very high level of sales transactions to investors,</li>
<li>Potential tightening of credit policy specific to Sydney,</li>
<li>Potential policy changes by Australia’s Foreign Investment Review Board to curb Asian investors, and</li>
<li>A significant supply of <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/ApartmentsApproved_States_2014-04.jpg" target="_blank">new dwelling stock in the pipeline</a>.</li>
</ol>
Under ‘normal’ circumstances the RBA responds to a property boom with a few interest rate hikes to caution consumers. But this current boom is isolated to Sydney – it’s not like the RBA can raise rates just in Sydney.
In fact, the RBA’s decision at its February meeting to reduce rates has the potential to add fuel Sydney’s market. A subdued employment market and sharp declines in commodity prices are bigger national issues which forced the RBA’s hand.
This is where that “working with other regulators to assess and contain economic risks that may arise from the housing market” comment is so interesting. What if the Foreign Investment Review Board passed legislation to restrict Asian investment in Australian real estate? Joker number one!
What if banks (with some ‘encouragement’ from the likes of APRA and / or RBA) tighten their credit policy just on Sydney-based securities to shelter themselves from extra risk? Banks have been known to do this before when they’ve identified a ‘location risk’ in the likes of the Pilbara and Moranbah. Joker number two!
Another possibility lies in China where there are reports of residential market declines of 15% over the last 12 months. Chinese banking executives and economists say that a severe housing downturn could cause a considerable increase in non-performing loans amongst Chinese banks. We know that when times get tough investment properties are often one of the first assets disposed of in order to bring the household budget back in to order. Further instability in China’s market could result in high levels of resale stock in Sydney. Joker number three!
Regardless, we expect vacancy rates to increase and rental yields to reduce in Sydney. An unhealthily high ratio of investor-owned properties is already occurring with ABS data confirming that 60% of NSW home loan approvals (refer Sydney) were for investors [30% is ‘normal’].
The Fundamentals
The performance of Sydney’s property market over the past 18-24 months is as spectacular as it is concerning.
Contrary to tabloid rhetoric, outside of Sydney, property markets are experiencing <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/MedianValues_Capitals_2011-2014.jpg">a predictable post-GFC recovery phase</a> with normal rates of growth (0 to 6%) over the past 12 months.
The state of New South Wales is home to 7.4 million people (a third of <a href="https://www.propertyology.com.au/wp-content/uploads/2014/10/Aust_PopulationConcentration.jpg">Australia’s total population</a>) and 4.3 million (18.7%) of these are in Sydney
<img src="/images/2015/02/09/pressley%20feb%209%20one.png" alt="">
Greater-Sydney can be broken in to ‘Metropolitan’ and ‘Western Sydney’. With a population of 2.06 million people (8.9% of Australia), Western Sydney on its own is bigger than the combined populations of South Australia, Tasmania, ACT, and Northern Territory.
With a median house price of $730,000 Sydney is the least affordable location in Australia (miles above the capital city average of $580,000).
For the same price that you can buy a Sydney apartment (median value $576,000) you can buy a house in every other location in Australia with the exception of Melbourne.
Sydney’s population growth rate has been below the national average for much of the past 10 years, and only ahead of economic minnows South Australia and Hobart. Rate of growth is completely different to population size.
<img src="/images/2015/02/09/pressley%20feb%209%20two.jpg" alt="">
New South Wales has a long history of people immigrating away from Sydney to alternative locations. Cost of living, especially housing, is a key factor.
<img src="/images/2015/02/09/pressley%20feb%209%20three.jpg" alt="">
Sydney has been Australia's worst performing capital city market since the 2000 Olympic Games. Sydney’s high property prices meant less buyer competition to force the rate of growth that other locations around the country have historically experienced. It’s not until we had 60-year low interest rates that Sydney has first significant price growth spurt in more than a decade.
<img src="/images/2015/02/09/pressley%20feb%209%20four.jpg" alt="">
Through 2000 to 2010, the NSW unemployment rate was regularly above the national average. A massive job swing has recently occurred; of the <a href="https://www.propertyology.com.au/the-environment-for-property-investors-is-healthy/" target="_blank">134,408 jobs created nationally</a> during 2014, 52,975 of these were in Sydney. Boom!
<img src="/images/2015/02/09/pressley%20feb%209%20five.jpg" alt="">
Metropolitan Sydney is Australia’s white-collar capital and unemployment rates are currently up to 50% better than the national average. Much of the recent jobs growth has been in white collar sectors such as financial services. If only people can afford to buy a property in Metro Sydney.
Large parts of Western Sydney, on the other hand, have significantly fewer job opportunities. Manufacturing accounts for 16% of jobs (not ideal in the current climate) while a fifth of all businesses are in the construction industry. Australia’s highest crime rates are in Western Sydney.
<img src="/images/2015/02/09/pressley%20feb%209%20six.png" alt="">
To overcome a reported 182,000 job shortfall, tens of thousands of people have to commute from the more affordable western suburbs to work in metro Sydney each day.
Transport infrastructure has not kept pace with population growth. The rail network has not been significantly expanded since the 1930s, yet the region’s population is now five times greater. The heavy reliance on passenger cars results in horrendous traffic congestion, loss of productivity, and high fuel costs. Remember that earlier Interstate Immigration graph?
15 years of babble about Sydney having run out of land and therefore having <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/Supply-and-Demand-State-by-State_2014.11.pdf" target="_blank" style="font-size: 12.1599998474121px; line-height: 1.3em;">an under-supplied property market is not totally correct</a>. Metro Sydney’s land shortage has been compensated by higher density construction while sprawl has occurred to the west. Overall, dwelling construction was greater than required until the GFC handbrake was applied. The tightening of supply is another reason for the more recent pressure on Sydney property prices.
There is significantly more supply in the property pipeline. Building approvals are now at record levels.
<img src="/images/2015/02/09/pressley%20feb%209%20seven.jpg" alt="">
My money is on Sydney performing similar to the last 15 years – below the Australian average. But the immediate question is whether policy makers play one of those jokers!
Simon Pressley is managing director of Propertyology, a property market analyst, accredited property investment adviser, and buyer’s agent.
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology </a>works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.
<h2><a href="component/content/article?id=39635" target="_blank">How to purchase high-performing investment properties: a free Propertyology eBook</a></h2>
 
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The Sydney property market house of cards - the joker in the pack: Simon Pressley

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GUEST OBSERVATION
Melbourne has defied the critics with better than expected post-GFC property price growth. The city boasts a wonderful cultural lifestyle, Australia's best town transport network, and year-round tourism.
But, is that enough to justify plonking money in to a market where the cost of accommodation is already significantly higher than two thirds of Australia?
A significant portion of Victorian government revenues over the last five to six years has been in the form of property-related taxes from an <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/2013.02.16_Propertyology_FieldOfDreams.pdf">over stimulated construction industry</a>.
<img src="/images/2015/01/30/pressley%20jan%2030%20one.jpg" alt="">
We have been increasingly concerned about an oversupply implication on Melbourne property markets. The data in our building approvals graphic shows that property supply has been significantly higher over the last five years than previous trends.
To date, the higher supply has been counter-punched by higher demand in the form of a swing in population growth. Population growth rates have come from two main sources: <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/InterstateMigration_2014-06.jpg" target="_blank">net interstate migration</a> and the international student market.
We believe that Melbourne’s property market is very delicately poised. We question the sustainability of Victoria’s ‘we’ll keep building and they’ll keep coming’ strategy. The market has been over supplied for some time. Rental yields are already the lowest in the country and vacancy rates will rise above where they are now.
In our opinion, Victoria has some significant economic challenges on the horizon. The state has a high exposure to manufacturing and the closure of Ford, Holden and Toyota during 2016-17 will inflict a lot of pain. According to a study conducted by University of Adelaide, 98,000 Victorian jobs will be lost. The city councils with the biggest exposure are Melbourne City (15,000), Hume (9,000), Dandenong (7,000), Hobsons Bay (6,000) and Geelong (5,000).
A new state government was elected in to office in November 2014 which resulted in the scrapping of one of the state’s very few major infrastructure projects – the $18 billion East West Link transport project.
With a waning manufacturing industry, fewer state-owned assets than the likes of New South Wales and Queensland, and a small infrastructure pipeline it remains to be seen how the jobs will be created to support a growing population.
Will the new government play the ‘just expand the public sector’ card?
<img src="/images/2015/01/30/pressley%20jan%2030%20three.jpg" alt="">
Even with the higher population growth rates, the rates of property supply are enough to be concerned about. Things could become quite ‘ugly’ if intervention doesn’t create the extra jobs needed to support population growth. We might see interstate migration trends do an about face over the next couple of years.
Simon Pressley is managing director of Propertyology, a property market analyst, accredited property investment adviser, and buyer’s agent. 
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology </a>works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.
<h2><a href="component/content/article?id=39635" target="_blank">How to purchase high-performing investment properties: a free Propertyology eBook</a></h2>
 
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Melbourne oversupply is an increasing concern: Simon Pressley

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GUEST OBSERVATION
Located between the two large urban footprints of Brisbane and Gold Coast, property investors are often attracted to Logan’s low property entry price and higher rental yields. 
Demand for accommodation in Logan has been high based on its average annual population growth rate of 2.3% over the last decade - superior to the Australian average of 1.7%. This trend appears to be holding firm.
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" width="147">
Population Growth
</td>
<td valign="top" width="131">
2003-2013
</td>
<td valign="top" width="114">
2008-2013
</td>
</tr>
<tr>
<td valign="top" width="147">
 
</td>
<td valign="top" width="131">
(10yrs)
</td>
<td valign="top" width="114">
(Post-GFC)
</td>
</tr>
<tr>
<td valign="top" width="147">
Australia
</td>
<td valign="top" width="131">
1.7%
</td>
<td valign="top" width="114">
1.8%
</td>
</tr>
<tr>
<td valign="top" width="147">
Queensland
</td>
<td valign="top" width="131">
2.4%
</td>
<td valign="top" width="114">
2.1%
</td>
</tr>
<tr>
<td valign="top" width="147">
Logan
</td>
<td valign="top" width="131">
2.3%
</td>
<td valign="top" width="114">
2.2% 
</td>
</tr>
</tbody></table>
<img src="/images/2015/01/12/logan%20jan%2012.jpg" alt="">
Other than a spike in building approvals in 2010-11, Logan’s housing supply has been consistent with population demand.
<a href="https://www.propertyology.com.au/free-reports-articles-archive/" target="_blank">Our research</a> confirms that locations where developers are concentrating most on future supply include Jimboomba, Loganlea, Browns Plains, Waterford, and Beenleigh.
What Logan lacks most is sufficient local jobs. An unemployment rate of 6.4% is significantly above Brisbane’s 5.1%. According to Census data, of the 300,667 population 123,619 are employed although only 72,745 of these jobs are within Logan themselves.
The region’s biggest employment nodes are Springwood and Browns Plains and both catchments battle significant traffic congestion.
A largely blue-collar demographic, Logan’s biggest industries are:
<ul>
<li>Manufacturing ($4.9 billion output per annum),</li>
<li>Rental, hiring and real estate services ($2.4 billion),</li>
<li>Construction ($2.3 billion),</li>
<li>Retail ($1.1 billion), and</li>
<li>Wholesale trade ($1.1 billion).</li>
</ul>
Transport and logistics, food manufacturing, and health care have been described as ‘emerging industries’ although there is very little tangible progress.
While the local government has been gallant in trying to improve its reputation with a ‘City Of Choice’ campaign, it still has a high rate of crime and a distinct lack of attractions.
With the supply-demand equilibrium expected to continue, I believe that Logan will to continue to performer steadily although better investing can be found in select pockets of Brisbane.
Simon Pressley is managing director of <a href="https://www.propertyology.com.au/" target="_blank">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014).
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Is it time for Logan to make its mark?

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GUEST OBSERVATION
I expect the Gold Coast market to surprise many pundits and become one of Australia’s best performers during 2015-2017. The storm clouds are gone, the sun is due to shine – and quite brightly. However, there is still some turbulence in the waters.
Tourism drives the Gold Coast’s economy. So, when the global financial crisis (GFC) hit in late-2008, consumer sentiment disappeared, jobs were shed and its property market suffered.
The Gold Coast’s only other industry of note is construction and a significant pre-GFC over-supply compounded things for its property market. In spite of having population growth (3.1% per annum during 2003-2013) of almost double that of the national average (1.7%), the Gold Coast was the worst performing market in Australia for a few years.
<img src="/images/2015/01/01/pressley%20jan%205%20one.jpg" alt="">
As the above graphic shows, building approvals declined considerably post-GFC and a lot of the surplus supply has now been soaked up. Vacancy rates have tightened. Sales volumes and property prices are already growing.
Consumer and business sentiment have improved over recent years. The new Gold Coast hospital plus a $1.8 billion passenger rail project have been good for jobs growth. Work has commenced on a $670 million expansion of Pacific Fair which will make it the largest shopping centre in Queensland.
The $500 million athlete’s village for the 2018 Commonwealth Games and a $1 billion luxury hotel by Chinese developer, Ridong, are other major projects.
<img src="/images/2015/01/01/pressley%20jan%205%20two.jpg" alt="">
The tourism boom which we predicted two years ago has arrived, meaning things will only get better for the Coast.
A decision on a proposed $7 billion mega resort is due in early-2015. An economic impact statement released by the proponent in September 2014 suggests that, if completed, tourism revenue could increase from $1.15 billion per annum to $8.9 billion; 15,000 jobs could be created.
By the end of 2015, I believe the data will show Gold Coast to have been one of the strongest markets in Australia.
But don’t be fooled, leopards don’t change their spots!
Gold Coast Mayor, Tom Tait, is a developer by trade and he is very pro-construction. There have been a number of large building applications lodged during the last 12 months. Significant oversupply is expected again in a few years time. Areas with a high concentration of new supply will include Southport, Coomera and Labrador.
Simon Pressley is managing director of <a href="https://www.propertyology.com.au/" target="_blank">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014).
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Simon Pressley

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