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Empower Wealth Blog post by Empower Wealth

2015 Australian Property Market Outlook | Part 4 – Perth, Adelaide and Tasmania

For the Fourth Part of our 2015 Australia Property Market Outlook, Ben Kingsley and Bryce Holdaway discuss about property market at Perth, Adelaide and Tasmania and if there are any investment opportunities to grab in 2015. Investing at mining towns had been a topic of conversation for years but with the drop in the price of coals and the mining sector growth in China, this might indicate the slow down of Australia’s mining activities. Ben and Bryce will be discussing these economical impacts and provide some real life stories about some of our clients. Adelaide on the other hand with news on the Olympic Dam, might be an interesting market to monitor for 2015. They will also be discussing about the potential investment opportunities in Tasmania.  Watch the video to find out more.

The 2015 Australian Property Market Outlook is broken into six short parts. Click on the links to learn more:

Part 1: Property Market in Sydney and Regional NSW
Part 2: Property Market in Melbourne and Regional VIC
Part 3: Property Market in Brisbane and Regional QLD
Part 4: Property Market in West Australia, South Australia and Tasmania
Part 5: Property Market in Northern Territory and Australian Capital Territory
Part 6: Summary of Australian Property Market in 2015


2015 Australian Property Market | Perth, Adelaide and Tasmania [Transcript]


Ben: Speaking of mining and mining centres, let’s head over to the West and talk about Western Australia, mainly Perth. What’s your view on the Perth market, Bryce?

Bryce: Yeah, my hometown. I think there still is that fly in, fly out workforce that exists there. So there are still opportunities. But as a general market in terms of sentiment, I think it has changed. I think you can group Perth. You can group Canberra and you can sort of group Darwin altogether.

In terms of where they are in the cycle, it’s probably at the peak and coming off the other end. So you need to be careful. But again, you can see opportunities in those three markets. But in terms of investor sentiment and interstate sentiment into those markets, it’s definitely on the downward trend.

Ben: Macro view, Perth, steady, flat. So pace of growth, well actually, slow or no growth, because of that whole sentiment story and job security that’s going to occur in that market. So like any market, still find opportunities. If you’re playing in the Perth market, you’re probably maybe looking for land opportunities where you can add value, do some very nice stuff.

But in general, we’re not going to see that general uplifting land value and we’re not going to see that capital growth come through. Some of the mining centres and lifestyle centres are probably a wait-and-see attitude for that. I mean you are buying kind of cyclical but I still think there’s more to come off and I would be looking at those markets probably 2016, 2017 for some bargain basement buys as opposed to going in there now, because the yields are still OK. But I just can’t see any growth at the moment.

Bryce: Yeah, if you don’t want to slip, then don’t go to a slippery spot. So …

Ben: There’s a new one. That’s a beauty.

Bryce: You don’t want to go into these mining towns given the sentiment that exists there.

Ben: Exactly. Let’s jump into Tassie and have a look at the Tasmania market. Look, population growth near non-existent. I think – and, you know, there’s a small amount of population growth, job opportunities, brain drain of people. Great tourism location, lovely place to visit, but just not giving me any confidence around growth.

So even though you want yield, you want to get a bit of growth in behind that. I can’t see that growth for the time being. So I’m going to steer clear of the Tassie market.

Bryce: Yeah, think again if you look at Tasmania or even if you look at Adelaide. They’re got a similar situation where the entry level is quite low, which means the yields are quite attractive. But it really comes down to where you can get the good yields and the upside in terms of our capital growth.

So if people live in those cities, and they see an opportunity there, I think there is a good yield play.

Ben: Oh, yeah.

Bryce: But for – I guess in terms of a national view for people who don’t live in those cities, there’s probably a better opportunity in Brisbane.

Ben: And when you talk about affordability, because that’s what we’re talking about, we’re talking about what it costs to buy in and what yield we get. Just because Melbourne and Sydney have made in-house prices, you know, Sydney over 700,000, Melbourne hovering around that sort of 6, 650 range. What you’re actually talking about there is then we go and see a $200,000 house and we think, “Wow, that’s affordable.”

But then we also look at the average household incomes that are coming in there and it’s like, well, that’s all relative. So let’s move on to South Australia. Adelaide more specifically. What we are seeing is we are seeing some infrastructure developments and we’re seeing Adelaide get a bit of confidence back about itself with the Adelaide overall redevelopment, the new convention centre, and a lot of medical – new medical facilities and upgrades along the Northern Terrace there.

So it’s an interesting play because I think Adelaide is now starting to – the city is starting to get a bit of an identity and people are going to be attracted to that Friday night, Thursday night football, the biggest game in town.

That is the positive. The negatives are the manufacturing and mining sentiment and the brain drain that comes out of that to go to the major cities.

Bryce: Yeah, because really the number one driver for capital growth is income growth and if you’ve got a city that largely has people looking to go to other sort of states to earn better money opportunities, that’s always going to have a glass ceiling effect on the prices and I think that’s evidence of the fact that their median price is so low compared to the rest of the country.

But I’ve been to Adelaide. I’ve been to Hobart many times with the show. It’s a fantastic place to be. But if you’re going to consider whether they are the places to invest, I think be pretty cautious.

Ben: Yeah. I think Adelaide better than Tasmania. I actually think Adelaide – you could – if we really needed to, I think we could go in there and buy a bit of stock for our clients because there is some upside. But again, when I weigh it up with other opportunities, which is obviously why we get paid to do what we do, I would probably be buying elsewhere.

Bryce: Because if you think about being statistically safe, South Australia has about eight percent of Australia’s population and Tasmania has one percent. So between the two states, they don’t even make up one-tenth of our population. So that’s something that really needs to be considered.

Ben: It does. Let’s get into the territories. Oh, look, South Australia Country, no, nothing at the moment. I mean Olympic Dams, keep an eye on that. Keep an eye on some oil prospecting that’s going on out in that sort of Coober Pedy region. But that’s very speculative. So we don’t want a lot more confidence score around that before we actually took our clients into those markets. So the territories, we will start with..

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