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Empower Wealth Blog post by Empower Wealth

2016 Property Outlook (Part 4) | Northern Territory, Western Australia and Tasmania

Here are the other parts of the 2016 Property Outlook:

Part 1: Sydney & Regional NSW
Part 2: Melbourne & Regional VIC
Part 3: Queensland, Australian Capital Territory and South Australia
Part 4: Northern Territory, Western Australia and Tasmania


Transcript:

Bryce Holdaway: I guess that leaves us with the three states that are probably on the not-act list for 2016 and for us that’s Northern Territory.

Ben Kingsley: Yes.

Bryce Holdaway: Western Australia.

Ben Kingsley: Yes.

Bryce Holdaway: And Tasmania. I think poor old Western Australia, largely is the one product, one customer town and they’re really suffering from a bigger picture from the drop in the iron ore price. So I think a lot of people are feeling the heat over there and rental returns are suffering big time. So I think that my old hometown of Perth, it pains me to say but at this stage, not on the radar for us from a borderless investment perspective to be buying in Perth.

Ben Kingsley: Yeah. For me it’s – it will probably come into the watch category, second half of 2016, just to see how it’s going because I suspect we’re seeing slowing population growth, if not maybe even negative population or migration. So whereas when you’ve got CAPEX expenditure like how we’re doing and it’s quite literal, isn’t it? It’s a beautiful place, more better days than worse days in terms of weather-wise.

So from that point of view, it’s good. But if the job opportunities and the incomes that were touted before are no longer there considering that they’re still finishing off a lot of those subdivisions in new housing land areas. It just says to me that we look at the supply side or we look at the vacancy rate starting to creep up. So from that point of view, that’s why it’s on a no-act now but might come back on to the watch list or it could stay on the no-act for the rest of 2016.

Bryce Holdaway: We know some people that are buying in the market and they’re looking for opportunities to add value to the land in terms of subdividing the land banking and so again in terms of that pre-emptive accumulation phase, if you know what you’re doing, the negotiating conditions work well in your favour. So there’s always opportunity to any market and again, 70 percent of the market is buying for someone to live. But in terms of whether or not we would be sort of actively looking in the first half of 2016 as you say, there are probably better opportunities.

Ben Kingsley: I think the economic prosperity there, the GDP will start to slow a bit more. We’re starting to see that in a rising unemployment rate. So for me, yeah, it’s sort of just saying, look, I will keep it in the distance. We will keep running the rule over it. You know, our data allows us to do that pretty quickly. But yeah, right now, it’s in a non-act. It’s a sit on the sidelines. We’ve got them on the bench.

Bryce Holdaway: We do have it on the bench. Northern Territory. Largely represented by Darwin. A huge oversupply of apartments.

Ben Kingsley: There we go again.

Bryce Holdaway: In the Central Business District. CBD stands for “could be dangerous”. So I would suggest that people – I mean if they’re watching our 2016 Outlook videos Ben, and they haven’t got the message yet.. No green fields, no house and land, no brand new apartments and I think that – they all had a good run only a couple of years ago.

Ben Kingsley: It was the top performing city in the last seven years outside of Sydney’s last two years. So that just goes to show you the guest projects. It has got a lot of untapped raw materials and minerals that are available in the Northern Territory themselves but they’re going to run for a port. That port is most likely going to be the port of Darwin. We’ve just seen a new lease go out for that new port of Darwin. So there will be some Chinese money spent on that.

The Americans haven’t even arrived yet. So that’s why it’s sitting on the bench but I’m probably a little bit more excited about how quickly a marketplace can turn because it’s such a small population base that if the economy twigs and switches on, then demand is real quick and because you can’t build supply into that quickly because you can only build roughly for nine months in a year, it’s slow. So, you can really see some very bullish yields quickly and some really sharp vacancy rates coming quick. So that to me, you might pull them off the bench and you might get some early possessions if you do. But at this stage, we will keep it on the bench.

Bryce Holdaway: Great sport analogy there. I knew you would throw it in there and then last of all we’ve got Tasmania. So typically Hobart.

Ben Kingsley: Yeah.

Bryce Holdaway: And I think – I think the affordability in Hobart is phenomenal and – but they – you know, tourism, retail. So the unemployment is a challenge there but at some point in time, when you’ve had Sydney and Melbourne and then Brisbane and then Adelaide, it’s largely – people are going to start to look there and see opportunity for potential grown in you but not yet.

Ben Kingsley: Yeah. Look, for me, I was down there I think just before Christmas and I went down to the water ferry there and it’s quite nice. It’s sophisticated. The food is always fantastic.

Bryce Holdaway: That’s my favourite place to go. When we would film on location, I – whenever it’s …

Ben Kingsley: Fresh produce, amazing down there. So – and I think with a growing population, their tourism story and their organic and natural beauty stories, everything about where they want to take their profile and their brand and I think that’s going to be important for them.

So that does say to me, OK, well, they’re in and out. So if I was – had short term accommodation, that could be a good thing but in terms of what do the staff earn when they’re working in the restaurants to bars and the hotels, not a lot.

It will have a spike because if you look at your overlay, even the average income and even the social welfare payments compared to what you can buy in some of the houses down there for, it sort of does say to you, wait a minute. There’s a bit of growth in there but it’s – I just can’t pick that market easy. So for me, if I can understand when I see the cycle turning, I’m not going to play there.

Bryce Holdaway: Agreed. So Perth or Western Australia. Darwin/Northern Territory and Hobart/Tasmania on our non-watch and act …

Ben Kingsley: I will throw a little sneaky one in there for those who have hung around on the video and I will say this, that Western Australia – that Broome is going to be of interest to me probably in the second half of 2016 and I say that because Broome passes the liveability score and so what I want – it has been depressed.

So if I think medium to longer term, be fearful when others are greedy and be greedy when others are fearful, it could be a marketplace where you can get some really nice yield and it could be some – with some spiky growth. But again, it comes down to I wouldn’t be doing as my first investment. If you’ve got a decent portfolio and you wanted to have a little bit more of a risk-reward play, that could come on to the radar for me on the second half. It’s a little smoky for the – any smokies for you?

Bryce Holdaway: Not quite as good as Broome there. For me I like to keep an eye on the Tasmanian market. I think in a battery point – what is it? Sandy Bay Battery Point, some of those really beautiful period areas close to Hobart and if you compete at the right price. But …

Ben Kingsley: I agree. Well, it comes down to that point, doesn’t it? It’s like if we’re looking at very selective markets in these Sydney markets, those two or three suburbs make good sense to me as well. So there’s Bryce’s smoky as well.

Bryce Holdaway: There you go folks. Well, there you have it. There are our around-the-grounds for Property Outlook in 2016. Of course Ben and I are the co-host of The Property Couch. So if you’re interested in getting the insider’s guide to property investing, feel free to go TheProperty.com.au and we’ve got almost a year up in on The Property Coach. So there are about 50 odd episodes there that you can go and check out and our tip for you if you are interested in learning some information is start from episode number one.

Ben Kingsley: Yeah, listen to one episode that might get your attention. If you like the content, then go back to episode one. And look, we can’t go past without – obviously with …

Bryce Holdaway: Product placement. Did anyone notice that?

Ben Kingsley: Did you get that?

Bryce Holdaway: Ben and I really were really proud in 2015. We wrote our first book together on the armchair’s guide hits the props.

Ben Kingsley: Yeah.

Bryce Holdaway: To property investing, how to retire in $2000 per week and we talk about some principles and some frameworks that you can overlay to build your portfolio and I think the exciting part about it, there are five case studies.

Ben Kingsley: Yeah.

Bryce Holdaway: And in those case studies, we’re not talking about being a weekend renovator. We’re not talking about buying 20 properties in five minutes. We’re talking about conservatively building a portfolio and set up a future for them.

Ben Kingsley: Yeah. For me I think it’s the start to finish book in terms of if I was just starting out, I’ve got some good content about mindset, money management. But it’s also for the more advanced player. There are some good, strategic location area research and property type research in there as well. So it’s a good start to finish reference book for me.

Bryce Holdaway: So if you want to get a copy of that, you can go to EmpowerWealth.com.au/book or ThePropertyCouch.com.au/book and you can get a copy there and you will be able to – we will send that out to you straight away and you can check that out.

Finally, if you’re just interested in learning more about property investing, how to be a borderless investor, why not subscribe to our newsletter on EmpowerWealth.com.au where each month Ben, we send out a couple of videos each where we give you up-to-date tips, insights into the market on how you can stay informed.

Ben gives you some insights every month when the RBA gives their interest rate announcement. So, there are plenty of resources for anyone who wants to start with that in 2016. So go to www.EmpowerWealth.com.au.

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