Property Outlook 2010

If there is one thing that people are interested in it’s the value of property. We all enjoy it when the values of our property increases and it certainly makes for good media.  I don’t think there is a day that goes by without those current affair programs or the press talking about property—they love it when it goes up or down, just NOT when it goes sideways, because that’s not newsworthy and it doesn’t rate or sell papers.

Property Value

In a very ‘general’ look at property values, it’s our opinion that values in most major cities will tread water for the next 12 months, and that’s what’s going to be reported.

However below these statistics are the actual properties that make up these ‘generalised’ numbers, because there is no such thing as an average or actual median property, each property is different and therefore taking a view of the general market is really a short sighted investigation.

This property outlook piece is going to drill down to what we believe is where the opportunities are going to lie.  Just because it’s a flat overall market, values in some areas are set to rise and some areas are going to fall, and some areas may fall by double digits (greater than 10%).

 

Interest Rates

If interest rates continue to rise, the big issue is going to be affordability in the outer suburbs.  Wages / Income is not keeping pace with the latest valuation growth in these areas, so something will give, and it usually means values remaining flat or dropping, as new entrants are priced out of the market and those with high debt struggle to maintain the household budget, which leads to an increase in supply for those selling up of their own accord or being forced by their lenders, for not meeting repayments.

 

Affordability

The skill is to trying to learn to measure the threshold of income and affordability of an area to determine its likelihood for immediate future growth.  This is fundamental analysis work and is highly valuable data to prospective investors.

Empower Wealth has its own measure which is one that we have developed in-house with the combined knowledge of our experienced team and their years of experience, and unfortunately it is only something we provide to our existing customers, as there is only a limited market for great capital growth properties at any one time, so we don’t share our specific research to the general public.

However just knowing that affordability is a key driver of growth puts you ahead of the masses, so that’s a good thing. Properties well located, in limited supply, with relative affordability and a strong demographic mix of professionally qualified under 40 age group will continue to outperform well over the coming year, irrespective of whether they are units, flats, townhouses, or actual houses.

Areas that are experiencing a demographic shift to a younger professional set are also going to outperform the market, as these buyers seek to enjoy conveniences of work and social life balance, so they are usually suburbs within close proximity to the major employment centres (where they can get the higher incomes).

The old industrial areas closer to these cities are a good place to start your search, but you want a good cluster of residential and lifestyle options in the area.

 

We’ve said it before and we’ll say it again—there are always great ‘opportunities’ in all markets and market cycles for the astute investor who has a plan and does their research.