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20/7/2014 "PROPERTY REPORT - JULY 2014 - Consumer Reports"

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Real Estate IndustryJune 18th 2014

PROPERTY REPORT - JULY 2014

Boom over? Its really just beginning

by Terry Ryder.creator of hotspotting.com.auand RyderSelect

Introduction:

There we all were, minding our own business, thinking things were chugging along quite nicely -and then along comes Joe Hockey with his Budget. Suddenly, we're living in a different country.

I've long believed people over-rate political events like elections and budgets, in terms of their

impact on the economy and on property markets.

Many businesses and individuals defer spending decisions in the period leading up to such

events, because they perceive uncertainty in the likely aftermath. In reality, very little changes.

This Budget is different. It's content is so startling that it has shocked people across the nation

and caused consumer sentiment to fall.

While there was some minor tinkering with real estate issues (NRAS and first home buyer

savings accounts), nothing in the Federal Budget directly impacted the property industry. But

indirectly the consequences are major. Confidence is an intangible but essential ingredient of a

healthy property market and that has taken a battering. The belt-tightening by households and

by businesses that is an inevitable consequence of the Federal Budget may slow down real

estate.

But here's the thing: all situations present opportunities for investors. The question investors

should always be asking is: where's the opportunity in this?

And that's the question I will be asking throughout this edition the Quarterly Market Report.

Amid all the angst about the Federal Budget (and some of the State Budgets also), where do

the opportunities lie for real estate consumers?

For analysis of markets nationwide, click on the topics below ...

National Overview Wheres the opportunity in this?

Adelaide & SA Opportunities to buy for growth as Adelaide rises.

Brisbane & QLD Regional cities as well as Brisbane moving forward in 2014.

Canberra & ACT Best to watch and wait while the ACT absorbs Abbotts cutbacks.
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Darwin & NT Darwin may be poised to surge again.

Hobart & TAS Tasmania is starting to look like a market of opportunity.

Melbourne & VIC Still plenty of momentum in Melbourne and in regional Victoria..

Perth & WA Perth will continue to show price growth.

Sydney & NSW Sydney still upbeat but its time to look outside the city.

Conclusion Boom over? Its really just beginning

National Overview:Where's the opportunity in this?

Recently I spoke at seminars in Melbourne, Brisbane and Sydney, addressing this question:

Where are the opportunities for investors in 2014?

Thirty-two years of researching and writing about real estate have taught me that there are

always opportunities, regardless of the underlying national economic or political circumstances.

A primary reason for this is that Australia is a big country and there is no such creature as the

Australian property market. There are thousands of different markets and they are not all

moving in the same direction, nor at the same speed.

Media constantly speaks about the property market and recently has portrayed a national

property boom. But this merely confirms the lack of credentials of people writing for

mainstream media about real estate. There was no national property boom there was a

Sydney property boom. Melbourne also did well last year but none of the other major cities had

strong markets.

Because most of our major media comes out of Sydney and Melbourne, journalists there have

extrapolated their local situations to the entire nation, constructing a fictitious national property

boom.

Heres what has really happened, and this illustrates why there are always opportunities to buy

well somewhere.

The first city to move forward in the current real estate cycle was Darwin, followed by Perth. In

2011 and 2012, Darwin and Perth had strong rental growth, largely on the back of growth intheir resources sectors. Eventually, in 2012, this translated into solid price growth.

At the beginning of 2013, Darwin was the national leader on price growth, but was quickly

overtaken by Perth. Then Sydney started to rise and, in the second half of 2013, Sydney

became the national leader on capital growth. Melbourne moved forward also, while Darwin

and Perth subsided.

Meanwhile, nothing much was happening in Brisbane, Canberra, Adelaide or Hobart and few

regional centres recorded strong growth.

Now we are in different territory. The evidence in the first half of 2014 is that Brisbane,

Adelaide and Hobart will rise, Sydney and Melbourne will moderate somewhat, and Canberra

will continue to stagnate. There is evidence of a resurgence in Darwin - and Perth still has
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momentum.

The other key factor emerging is a ripple effect from big cities to regional areas. For example,

regional cities close to Sydney have started to rise, partly because they are catching the wave

from the state capital. Gosford and Wollongong are prime examples.

Other regional markets are rising also, notably in Queensland.

What does all this mean, in terms of opportunities?

It means that, at any given point in time, there are opportunities to buy well for future growth.

In late 2011 and early 2012, I was telling Hotspotting customers it was a very good time to buy

in Perth, because the state economy was so strong and high rental growth was about to

precipitate a rise in dwelling prices. That indeed occurred in 2012 and early 2013.

In the second half of 2012, I was telling anyone who would listen to get into Sydney, before

prices started to go ballistic, for the first time in 10 years and thats what happened in 2013.

And late in 2013, my advice was to focus on Brisbane and Adelaide, because the fundamentals

suggested those cities were starting to follow the lead of cities like Perth and Sydney. There

were also reasons to believe Hobart would rise, also.

Recently Ive been saying I would rather be a seller than a buyer in Sydney. The opportunities

have gravitated outside of Sydney to regional cities. Its a common pattern in real estate cycles

that an upturn starts in the centre of the major city, ripples out gradually to the middle ring and

outer ring suburbs, and then moves beyond the big city to nearby regional areas.

It doesnt always happen that way, but its a pattern that regularly shows up.

Now we are seeing the suburbs in the City of Gosford, a little north of Sydney, rise strongly

(after 10 very ordinary years) and Wollongong to the south is growing as well.

There are many other opportunities in real estate. One relates to town planning changes around

the nation, with many state governments and local councils moving to free up restrictions on

what can be done with residential land. This is designed to encourage in-fill development and

capture population growth within the existing footprint of the city, rather than have ongoing

urban sprawl.

There are myriad new opportunities throughout Sydney, some related to changes by local

councils such as Blacktown City and Sutherland Shire, and others which apply across the

metropolitan area, such as the ability to build granny flats in locations not previously allowed.

The relaxation of rules surrounding granny flats is happening around the nation, including in New

South Wales, Western Australia, the ACT, Tasmania and the Northern Territory.

At Hotspotting were calling it The Town Planning Revolution and its opening up investment

opportunities that previously did not exist right around Australia.


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Adelaide and South Australia:Opportunities to buy for growth as Adelaide gradually rises

Investors always under-rate South Australia. Even South Australians under-rate South

Australia.

The Hotspotting website has published a SA Hotspots report for many years but recently

scrapped it because no one was interested.

Those who discount the prospects of SA have missed some impressive growth. Port Lincoln

has been one of the nation's better performers, with growth above 15% in 2013. Whyalla has

had several double-digit growth years in the past five years, while Port Augusta grew 11% in

the past 12 months and Clare was up 15%.

Now, there is an upturn happening in the Adelaide market. The latest data from various

research sources suggests a gradual upturn in the market.

Australian Property Monitors records a 1.3% rise in the March Quarter and a 4.1% increase inthe 12 months to the end of March. The ABS House Price Indexes similarly records a smallish

rise in the March Quarter and 4.9% annual rise.

In the three months to the May, RP Data records a 1.6% quarterly rise and a 4.3% annual rise.

This is supported by data in The Price Predictor Index published by Hotspotting. Sales volumes

have been rising steadily since the second half of 2013, pointing to price increases in 2014.

Where's the opportunity in this? Adelaide prices, generally speaking, haven't risen a great deal -

yet. I expect Adelaide to feature strongly on the list of rising capital city markets by the end ofthe year. Those who buy now, strategically, should experience some capital growth.

Locations of particular interest include the municipality of Onkaparinga in the far south of the

Adelaide metropolitan area. This area is the city's leading population growth area, has a wine

district and beachside suburbs, and is being boosted by two transport infrastructure projects:

the upgrade of the Southern Expressway and the extension of rail links to Seaford.

The next step in the plan to extend rail links further south beyond Seaford and key beneficiaries

will be Aldinga Beach and Port Willunga.

Opportunities to buy well for future growth exist across the city of Adelaide. The local

governments areas of Salisbury and Port Adelaide Enfield in the north feature among the

examples.

The regions present opportunities as well. Port Lincoln continues to grow and Mount Gambier

has recently recorded a surge in residential sales, with price rises around the corner.

Brisbane and Queensland :Regional cities, as well as Brisbane, moving forward in 2014


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2012 was the year of Darwin and Perth. 2013 was essentially the year of Sydney and, to a

lesser extent, Melbourne and Perth.

The current year is Brisbane's time in the sun. Many other markets in Queensland are rising

also.

Brisbane is behind other cities in the property cycle because of the double whammy of severe

floods in 2011 and the election of a new State Government (which sacked 15,000 publicservants and cut spending) in 2012.

Those impacts have now faded and Brisbane markets are rising again. This is reflected strongly

in sales activity recorded in The Price Predictor Index.

The market sectors showing the strongest rises in sales volumes are Brisbane Northside and the

neighbouring Moreton Bay local government area, as well as Logan City, which is a cluster of

affordable suburbs between Brisbane and the Gold Coast in the south of the metropolitan area.

Brisbane Northside suburbs tend to be middle market locations with median house prices in the$500,000s and $600,000s, with units in the $300,000s and $400,000s. Many of these suburbs

have train links to the Brisbane CBD, good road links, plenty of shopping and other amenities,

and good proximity to jobs nodes. The Brisbane Airport and the Port of Brisbane are close

together in this precinct and around them has emerged the Australia Trade Coast commercial-

industrial area.

Opportunities to buy for future growth are available around the metropolitan area, including in

the western and southern suburbs. The only sectors that are sluggish in getting on the general

growth path are Ipswich City in the south-west and Redland City in the east (Brisbane does not

rate its bayside areas highly, largely because there are mud flats rather than beaches).

Queensland is the most de-centralised of the states and has many strong regional centres. One

of the key features currently is that coastal cities with a reliance on tourism (which have had

weak property markets in recent years) are recovering. The economic recovery, helped by a

tourism revival, is being boosted by strong spending on infrastructure.

Three locations which stand out in this regard are Cairns, Hervey Bay and the Sunshine Coast.

Where is the opportunity in all this?

In Brisbane, I would be seeking investment properties in locations where sales activity has risen

but prices have not yet moved, or not much. There are good opportunities throughout the

Northside suburbs of Brisbane, but also in Logan City in the south.

In the regional areas, many of those coastal cities now moving into recovery phases have

attractive buying opportunities, because prices have declined in recent years. For example,

prices have dropped a lot in the Cairns apartment market, where there has been an over-

supply.

The Gold Coast also is entering a growth phase. There has been an upturn in sales volumes and

new infrastructure spending is having an impact. I continue to urge caution, because developers

are already sowing the seeds of the next over-supply. If you must buy on the Gold Coast, look

inland at the housing market and avoid the beachside high-rise, which will perform poorly long-


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Investors need to keep in mind that Darwin is an expensive real estate city. You cannot buy as

cheaply as you can in cities such as Adelaide, Hobart and Brisbane. Its nearly impossible to

find a house for less than $400,000.

Theres also a concern that the apartment market is heading towards another period of over-

supply. So investors need to be careful and to buy selectively.

Another opportunity lies in Alice Springs, one of the Northern Territorys few regional centresof substance. Alice Springs sales have risen in a similar pattern to Darwins but is also an

expensive place for real estate, thanks to isolation and land supply constraints.

Hobart and Tasmania:Tasmania is starting to look like a market of opportunity

The Tasmanian election has been and gone, the Government has changed and confidence levels

are higher. We are likely to see measures to stimulate the economy, including stronger activity inthe forestry sector.

At the same time, were seeing evidence that Tasmanian markets are moving forward.

Certainly, there are a number of markets in the capital Hobart and the second city Launceston

with upward momentum.

Where's the opportunity in this?

Hobart remains Australia's cheapest capital city. Very few suburbs have had meaningful growth

in prices in recent years. But there is an accumulation of positive factors suggesting price growthin the near future.

This means the buying is good. Those who buy now are likely to buy affordably and achieve

solid capital growth later in the year and beyond.

But will there be growth worth having?

A couple of factors suggest there will. The change of State Government is a positive from the

real estate viewpoint, because it lifts confidence levels.

The momentum in the Melbourne market is another positive. We have seen in the past that

Tasmania gets some uplift from strength in Melbourne. Often, after a period of strong price

growth in Melbourne, investors look elsewhere to buy at more palatable prices.

There are also a few major projects happening in Hobart - at last.

But the most positive indicator of price growth is the lift in sales activity late last year and the

early part of this year.

Markets to watch around the state capital include the inner-city suburbs of Hobart, theClarence LGA within the Hobart metropolitan area (on the eastern shore of the River Derwent)

and the Kingborough LGA south of Hobart, where suburbs like Kingston and Blackmans Bay

are rising.


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Both Launceston and the neighbouring municipality of Meander Valley are showing forward

momentum. Many of these places have median house prices in the $200,000s so there is

appealing affordability for investors as well as the prospect of solid growth.

The places to avoid are the small towns in the West Coast LGA, including Queenstown,

Zeehan and Rosebery.

Melbourne and Victoria:Still plenty of momentum in Melbourne and in regional Victoria

Contrary to media hysteria (and fictional figures published by the Real Estate Institute of

Victoria) Melbourne has not been having the granddaddy of all property booms.

In 2013, according to credible research sources (including the Australian Bureau of Statistics),

the Melbourne market rose an average 8%.

In the 12 months to the end of March, the market rise was about 10% for houses and 5% for

apartments. Thats solid growth but a long way short of a boom.

Annual rental growth has been just 4% for houses and 1% for apartments.

But theres still some way to go for Melbourne. While publicity-seekers have been competing

to be the first to declare that the boom is over, there is still plenty of forward momentum in

markets across Melbourne.

Where's the opportunity is this?

I would be targeting those markets with strong underlying fundamentals but which have not yet

shown significant growth. In particular, I would go for those strategic locations given special

status in the Plan Melbourne report.

That includes locations such as the Brimbank, Dandenong, Casey, Monash and Whittlesea

municipalities, all effectively designated as regional centres in the metropolitan area.

These are all locations in the middle and outer ring sectors of the Melbourne market. They all

have strong underlying growth in sales activity but to date have not recorded the same level ofprice growth as the near-city millionaire suburbs, which had their periodic auction frenzy in

2013.

There are also good places to consider in regional Victoria, including Sale in East Gippsland

and a series of good regional centres in the Goldfields region, including Ballarat, Bendigo and

Maryborough.

Down in the south-west, Warrnambool and Portland continue to offer affordability and growth

prospects.

Perth and Western Australia:Perth will continue to show price growth


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Since 2011 Perth has had strong growth in residential rentals and in house prices. For a period

of 2013, it was the price growth leader of capital city Australia (before Sydney took over).

This was underpinned by WA's status as the strongest economy in the nation, including nation-

leading population growth.

While media has been overly eager to declare the end of the resources boom, WA remains the

leading state economy, driven primarily by gas and iron ore resources.

Major resources projects remain under construction, notably the mega gas projects such as

Gorgon. At the time, new resources ventures such as the $10 billion Roy Hill iron ore mine are

just starting construction.

And in the meantime, the resources projects more advanced in the construction process are

now producing and exporting. This is the phase of the resources revolution often forgotten by

media the production phase, which is now delivering strong growth in exports from Australia.

So the flow of wealth into Perth continues. And many Perth suburbs still have sales momentum,with further price growth to come.

Rockingham City, one of the most popular municipalities in Perth for property buyers because

of its affordable bayside lifestyle, has elevated sales levels and, while there has been solid price

growth, it has not yet grown as much as other parts of Perth. Opportunities remain in this

market.

Swan City in the north-east of Perth is another local government area which will continue to

deliver growth. This is an affordable lifestyle area with growing spending on major new

infrastructure and I expect further price growth here as well.

Many of the best opportunities now lie outside the state capital, particularly to the south.

There is no doubt that markets around Mandurah, with a water-based lifestyle favoured by

retirees, FIFO workers and tourists, are rising. Once a national population growth leader and

darling of interstate investors, Mandurah underwent several years of price correction after

2007, but is now on the rise again.

Further south, Bunbury is at last showing signs of getting on the price growth path, while further

south again Busselton is another attractive seaside location with plenty of forward progress.

Sydney and New South Wales:Sydney still upbeat but its time to look outside the city

As a general comment, I'd rather be a seller than a buyer in Sydney in 2014.

After growth averaging around 15% last year, we're unlikely to see price increases of that

magnitude in 2014. There's still plenty of momentum in the Sydney market, but essentially thebest time to buy in the NSW capital was late in 2012.

Anyone buying now is likely to be buying at the peak of the cycle, which is the dumbest thing


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you can do as a property investor.

However, a core element of real estate is that there are opportunities in any market. And

Sydney will continue to present them. The difference now is that investors need to be much

more precise about where they buy.

Where's the opportunity in this?

The key now is to follow the infrastructure trail. Sydney is going to generate some specific

hotspots through spending on new transport infrastructure.

The decision to go ahead with an airport at Badgerys Creek will create an array of property

investment opportunities. This relates not only to the airport itself, but to the transport

infrastructure roads and rail links that will be created around it.

Its too early to be definitive about the best places to buy, but the City of Liverpool (which

includes the suburb of Badgerys Creek) is well-placed to benefit.

There are new rail links to boost prospects in both the north-west and the south-west of the

Sydney metropolitan area, and suburbs such as Westmead will benefit from the WestConnex

project.

But at this point in the cycle I see the best opportunities popping up in regional cities outside

Sydney. Gosford to the north and Wollongong to the south are prime candidates.

The City of Gosford has been a terrible performer on capital growth over the past decade, but

its about to have its moment in the limelight. Its catching the wave from Sydney and is being

boosted also by infrastructure spending and by a Federal Government decision to relocatehundreds of public service jobs from Canberra to Gosford.

Wollongong has fought back well from Bluescope Steels downsizing and other setbacks of the

past few years, and now has many growth suburbs looking good bets for price rises.

Further afield, Dubbo and Tamworth are strong regional centres offering affordability and good

growth prospects.

Conclusion:Boom over? Its really just beginning

When it comes to reporting real estate, Australian media is a rabble. Real estate articles are

written by people with no credentials or expertise, and the prime motivation is sensation,

especially negative sensation. The outcome is the worst kind of misinformation.

Three times in the past seven months, media has declared that the property boom is over,

only to be contradicted by subsequent figures showing that prices in Sydney and Melbourne

were still growing.

In reality, you can make the argument that a property boom is only just starting. To date, there

has been no national property boom. There has been a Sydney property boom over the past 18


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The rarest commodity in real estate is honestinvestment advice. Here's Terry Ryder@hotspottingin today's H/Sun - bit.ly/rydermelb

Neil Jenman@neiljenman

Show Summary

Powerful three words from @BrettLethbridge#badenclaypic.twitter.com/7A3X07RzPg

Retweeted by Neil Jenman

David Murray@TheMurrayD

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How lovely if Toni McHugh, lover of wife-killer

GERARD BADEN-CLAY, gave her media money tothe 3 parent-less kids. She'd get it back in r/e.


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Oh, men (me!) can be nave. I asked my wife@reidenjenman: Why does BADEN-CLAY'smistress humiliate herselfon TV? 200,000 reasons$. Right!


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Wife-killer! The end of GERARD BADEN-CLAY'sneglect, abuse & betrayal of a lovely woman. Toomany men abuse women. It's an epidemic of evil.


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0714 Consumer Reports