Sydney housing prices peak. Where to from here?
John J Maxwell | November 29, 2017
Recent corelogic results revealed that for the first time in a long time, property prices have flatlined in Sydney and produced zero growth for the month of August. This suggests that the boom-time gain as far as Sydney is concerned is likely to be over.
The Melbourne market appears to still be moving upward, although industry leaders such as John McGrath (and others) are now predicting that Melbourne could be ready to come off the boil very shortly as well.
Does this mean that property investment [capital growth] returns are over for years to come, in Australia? Answer: No - it doesn't.
Australia is essentially governed by 2 different markets, of which these can further be sub-divided (excuse the unintended pun) into regional and city zones. Sydney and Melbourne form one market, the rest of Australia broadly constitutes the other.
The reason for this duality in the Australian market is because as much as there has been huge growth in the Sydney and Melbourne markets for many years on end - these unprecedented growths have catapulted both cities onto the global stage. Both Sydney and Melbourne have cemented themselves as World-Class cities.
To keep it simple, the growth has been basically a supply vs demand equation. So why has Australia (and in particular Sydney and Melbourne) continued to be so attractive to invest in?
Most people realise that we have a very high level of migration into Australia. In fact, the highest level of any country. On top of that, our education system is highly attractive and following on from the GFC meltdown, in which we saw the demise of several country economies. I believe, this has only added to the popularity of the Australian market including foreign investment in property and business, in Australia. Australia has defied the global softening trend and stood tall as investors scan the globe looking for stable or better still 'growth' economies. For many, Australia stands out as a safe place to invest or at least to preserve their wealth through tough times. The collapse of the Australian mining industry might have also caused a large shift for many investors back to the real estate industry. Many are suggesting that there's enough fuel in the property market to keep it standing as Australia's most profitable investment sector.
All of the above factors (and much more not mentioned) add up to influence supply and demand in the market.
We've now got Brisbane stepping up to the plate. Previously referred to as a 'big country town' it's now vying for a seat at the 'Global City' table. This city has grown up especially over the last decade and bigger plans are in the pipeline to elevate the profile, appeal, and profitability of not only Brisbane but SE Queensland. This region is now seen as a sub-market of its own and many have been watching and anticipating Brisbane and the Gold Coast's moves and decisions. To me, this puts SE Queensland way out in front, as the prime market to not only watch but get involved in. Needless to say, many have already previously predicted this and have been quietly entering this market which with recent market sentiments, I expect we'll see this region start its surge - branded as a 'grossly undervalued' market.
In the previous property cycle, Brisbane was positioned at 48% of Sydney housing prices. It then surged to 78% of Sydney prices. What we've seen from the most recent surge in Sydney has placed Brisbane basically back where it began. Actually, following the growth of Sydney over the last 18 months, Brisbane is realistically starting the next growth run at considerably less than 48% of Sydney prices this time around.
To me, that's a grossly undervalued market regardless of whether Brisbane can gain World-class status, or not, and regardless of whether Brisbane (and now SE Queensland) can deliver growth results back to 78% again. Any way you look at it ... SE Queensland is ready and primed to surge in a big way!
John J Maxwell, senior mortgage, and finance consultant, Cocalex Consulting
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About the author:
John Maxwell is the founder and Senior Finance & Business Strategist at Cocalex Consulting. John has over 17 years' experience in the financial services sector, and has owned and managed 9 mortgage franchises and has developed a background in the holistic financial services realm. He has particular focus and passion for Leadership Training and Development, Franchise Development, and Business Networking.
