Real Estate Expert
The Sydney and Melbourne property boom that has dominated the Australian real estate landscape for more than five years is over and people are now wondering what’s next for our two big cities and when will the rest of the country catch up?
In our just released 2018 McGrath Report, we take a look at the biggest boom winners (the suburbs with the most growth) and what’s next for Sydney and Melbourne, including all the small market trends we expect to see as these cities return to normal selling conditions.
image via McGrath
We also look at some key trends across the country, including the transformation of regional hubs close to our big cities; the evolution of super apartments and residential towers incorporating retail and recreation; and the changing ways we are using our homes, including the Airbnb trend.
We also look at how immigration has shaped our property market and identify the dominant immigrant neighbourhoods of Sydney, Melbourne and Brisbane.
I’ll go into all of this in more detail over the next couple of months here on Switzer.com.au. Today, let’s start with a general overview of the Australian property market and I’ll also give you my Top 5 Suburb Picks for greatest capital growth potential in each east coast capital city.
The most frequent question I am asked year after year is “What’s the market doing?”, which is of course impossible to answer as there isn’t one market but rather multiple markets across the country.
If we were to take an x-ray view of the property sector, we’d observe two main markets: Sydney/Melbourne and Most Other Places.
We have seen the two big cities decouple from the rest of the country and create their own marketplaces, whilst most other regions have been rather lukewarm. This has created a value gap that is too wide, in my view.
While I believe the gap is likely to close somewhat over the next few years, it will not be because of a major correction of values in Sydney and Melbourne. Rather, it will happen as other cities play catch up. But while I’m certain that Sydney and Melbourne will take a breather, I’m equally certain there is no bubble about to burst.
To understand why, let’s look at the main drivers of growth for these two important cities:
1. Strong skilled worker population growth
2. Investor appetite for bricks and mortar
3. Ongoing overseas investment into Australia
4. Shortage of property supply in most markets
5. Record low interest rates
The key question for me is which of these factors are likely to disappear overnight? I believe that none will change dramatically over the next five years.
Let’s break it down to some basic tenets that in my view are beyond debate.
Firstly, we are fortunate to live in one of the luckiest countries in the world. We’re on the doorstep of Asia, where there is a huge appetite from middle class skilled immigrants to relocate to Australia. Add to that $2.3 trillion of superannuation money that is looking for safe, stable returns.
But didn’t the recent building boom address any shortage in supply? Well, sadly no, and it is highly unlikely to do so as population growth continues to outpace new builds.
And finally, will interest rates move upwards? I’m not an economist, however my research and feeling is that whilst rates will go up in the near future, they are unlikely to return to traditional borrowing levels for some time based on global trends making the cost of money relatively cheap well into the future.
I hope our 2018 Market Report provides you with the necessary knowledge and insights to make informed real estate decisions. The report can be downloaded from www.mcgrath.com.au
John McGrath’s Top Suburb Picks
Over a century after her formation, this grand old dame still represents one of the best lifestyles in the country. With the new WestConnex roadway removing much of the street traffic, this great suburb is about to become even more popular.
Sometimes it’s easy to overlook the obvious, like this hot suburb. Walk to Crows Nest, Neutral Bay and Mosman villages. Even the CBD, if you like. Heritage homes and modern apartment living. What more could the savvy buyer or investor want out of one postcode?
Hidden in the heart of the historical inner west on the edge of the Parramatta River, this newly developed village offers an exquisite selection of residences and is only a few moments from the vibrant Majors Bay Road retail and restaurant strip.
With dynamic young professionals and successful empty nesters seeking to stay within ‘God’s country’, capital values for this sought-after address will continue to spiral up as far as you can see. And deservedly so. There isn’t a better lifestyle in Greater Sydney.
Forestville remains one of my favourite picks for both lifestyle and value. Who said living near the CBD and beaches was out of reach? Forestville and surrounds has it all with a less hefty price tag than many of its neighbouring suburbs. But secure one here soon because Sydney’s best kept secret is fast getting out.
Put this mid-ring sleeper with its parklands and rolling terrain on your watch list. Savvy investors are holding onto townhouses and detached dwellings for an inevitable price uplift flowing from Coburg, where comparable homes cost more. Its train station with services to Southern Cross is a boon.
Tucked beside Footscray, West Footscray benefits from its easy access to public transport, a buzzing cosmopolitan food scene and Victoria University campus. Only 7km from the city and still in the early stages of gentrification, housing prices are a steal compared to similar properties in the east.
Bayside Mentone is more affordable than its neighbour Beaumaris, despite its plethora of
desirable private and public schools including Mentone Girls’ Secondary College and Mentone Grammar. Its beachside position, train station and period homes on large blocks will underpin its long term value.
Benefitting from its proximity to Doncaster’s many shopping, commercial and academic amenities, Doncaster East is quieter with a more leafy established charm and about 5% cheaper. Only 22km to the CBD via the Eastern Freeway, professional families are vying for its spoils.
This bayside beauty still has a six figure median house price but probably not for long. Hugging a strip of sandy beach overlooking Port Phillip Bay, it has a shopping village and metro train station. Stock remains scarce with just 88 of its 2,255 properties exchanging in FY17, according to CoreLogic figures. This means prices can only go up.
BRISBANE & SURROUNDS
The bayside Brisbane suburb of Wynnum offers an enviable lifestyle just 14km from the CBD. It borders the more prestigious Manly and boasts the same seaside village atmosphere without the hefty price tag, which is attracting younger professionals as well as interstate and international buyers.
Located about 25km north of Brisbane in the Moreton Bay region, North Lakes continues to
go from strength to strength with significant residential and commercial development continuing, including the $250M Laguna mixed use development. In the decade to 2016, North Lakes-Mango Hill had the largest population increase in QLD, according to the Bureau of Statistics (ABS).
The Gold Coast suburb of Coomera was the fourth fastest growing area in QLD in the 10 years to 2016, according to the ABS. Coomera will benefit from new infrastructure, including the $470M Westfield Shopping Centre which is expected to open in late 2018.
Peregian Springs, a master planned community located between Mooloolaba and Noosa on the Sunshine Coast continues to attract significant residential development, with the latest being its Ridges project. The suburb was also the second fastest growing area in QLD over the 10 years to 2016, with a population increase of 360%, according to the ABS.
The creation of the Caloundra South Priority Development Area (PDA) has reignited this suburb of the Sunshine Coast. It will become a community of 20,000 dwellings housing approximately 50,000 people, according to the QLD Government. The first residents have moved into master planned community Aura at Caloundra South with houses also being built at the Harmony community in the suburb of Palmview.
Holt is undervalued compared with neighbouring suburbs. Historical issues around social housing may be a contributor to its price lag however recent sales evidence suggests a catch-up has already begun in this northern suburb.
First home buyers love the newness of Ngunnawal and its schools, shops and amenities. Ngunnawal provides a diverse range of housing options from affordable entry level townhomes to large family residences. It is close to a station on the new light rail network that begins operations in 2018.
With its close proximity to shops and amenities, this family suburb is underpriced and attracting value buyers. Unrenovated three bedroom houses on blocks between 600m2 – 900m2 are very popular.
Phillip is characterised by apartments and proximity to Westfield Woden. It represents great buying and will be serviced by the next stage of the light rail development.
An established suburb with real local charm, Macquarie is undergoing a rejuvenation with young families taking advantage of its larger blocks and access to arterial roads, quality schools and major Federal Government employment hubs. It offers an abundance of amenities with both the Jamison Centre and Belconnen Town Centre close by.