Pure Property Investment’s Paul Glossop shares how some of the big markets in Australia are performing recently—will these markets pull investors up or push them down?
According to Mr Glossop, the vacancy rate in the city currently sits at 5 to 7 per cent in the middle to outer fringe. Meanwhile, jobs in the mining areas in the whole of Western Australia are increasing.
“They're talking about that as a bit of a renaissance of that market coming again,” the property professional highlighted.
However, he believes thatwill continue to be a sideways-moving market until there’s a fundamental shift in lifestyle and employment in the area. Ultimately, hitching your cart to a single job industry may not help in growing your portfolio.
If you want to invest in the city, Mr Glossop suggested waiting until there’s some evident positive movement in its markets.
“You've got to buy at the point where you start to see some growth … I think we're still a ways off there—six to 18 months depending on where the data goes … We're not rushing into that market anytime soon,” he said.
The Northern Territory may also not be a good area to invest in right now, Mr Glossop said.
While the region is a huge area, its market consists only of around 100,000 people, according to him.
Darwin, in particular, has seen a huge drop from its peak, and it’s expected to go down another 10 to 20 per cent depending on how interest rates change, he highlighted.
The property professional explained: “People forget that—NT's a huge area [with] 100,000 people. It's half the size of Hobart, it's a tiny market.”
Sustainability may prove to be an issue in the area, especially since there hasn’t been any significant change to boost its growth drivers.
“I think the next five years are going to be much of the same, where there's relatively standard slippage in that market. Yields on paper look decent but vacancy rates are high … Income's low [but] stock on market is high,” Mr Glossop said.
In contrast with Perth and the Northern Territory, South Australia remains a steady performer in the investment landscape, according to the property professional. Certain markets in the state have done well in the past three to four years, especially the “lifestyle markets”, he said, and they may continue to do so in the coming months.
Glenelg, Port Melbourne, Adelaide, and the 10- to 15- minute fringe between the water and the Adelaide’s CBD are among the markets worth checking out. Meanwhile, suburbs outside of the said areas may experience a little bit of downward pressure.,
Mr Glossop said: “I think there's going to be some hurt on that market from when we go out to the fringes to that $200,000 to $300,000 space."
“We've got some jobs creation issues coming from the Holden Plant closure that's going to continue to flow through that market over the next three to five years,” he explained further.
Despite these potential issues, Smart Property Investment’s Phil Tarrant believes that Adelaide might be a strong market because of the presence of defence industries in the area. According to him, there will be $200 billion worth of projects in the next decade to build ships, submarines, and other big-ticket items, and most of the construction will be happening outside of Adelaide.
“Wage growth and new jobs are one of the fundamental indicators of influencing property markets, so it's well worth having a look at that,” Mr Tarrant highlighted.
However, Mr Glossop reminded investors that there might only be around 5,000 to 6,000 new jobs created, which is not a lot considering the 10-year period.
Ultimately, you have to look at these growth drivers—infrastructure, job creation, and wage growth, among others— and its long-term effect on the markets before securing an investment.
Compared to all three areas mentioned above, Tasmania may just be among the hottest markets in Australia, according to Mr Glossop. Just last week, he was looking at three off-market options, only to lose them all to two owner-occupiers and one investor within a week.
“That market is as hot as I've seen any market right now,” the property professional said.
However, the high rental demand has brought about issues regarding affordability as well as insufficiency of stock in the market.
But while it could be detrimental to some investors’ portfolios, those who are looking to develop may capitalise on this “rental accommodation crisis”, according to Mr Glossop.
He explained: “No one's building enough, so if any builders out there are looking to do small subdivisions … [it’s a] very good market from a returns perspective [as well as] cash flow, as long as you pick [and] the right asset time.”
However, at the end of the day, Mr Glossop still strongly encouraged diversifying your portfolio instead of having all of your assets in one market, no matter how good the current circumstances are.
Tune in to Paul Glossop and Alex Whitlock’s episode on The Smart Property Investment Show to know more about how property markets are performing across Australia and where to see the real opportunities.