A buyers’ agent shares his forecast for Australian property markets

Are capital cities still the safest places to invest in? Why should buyers “take their blinkers off” to find good properties? Propertyology’s managing director shares his insights and his best tips for investors looking to successfully create wealth through property:

Are you quite optimistic about the markets today?

Simon Pressley: I've been quite bullish about it, but the best opportunities—if we were to draw a line in the sand five years from now and then look back and say, "These were the best performing locations," it's highly likely they're not going to be the same locations that have been the best locations for the last five years.

In 2011… eight out of eight locations declined in value. So, if we were trying to be a DIY in 2011 and [look] for the future hotspot, and we were looking at historical information, it'd say, "Oh, keep your money in your pocket. Everything's miserable." But now, with history behind us, we know that in the second half of 2012, Sydney started a really, really strong run.

What would be your tip for property investors heading into 2018?

Simon Pressley: I think it's important for all investors to recognise that no market runs well forever... Things are never usually as bad as what they appear. Sydney and Melbourne, Australia's two biggest cities, have had really, really strong runs. We've probably all been guilty over the last couple of years saying, "I think it's near its end." and then [we find there’s a] bit more petrol in its tank.

How could the recent Australian Prudential Regulation Authority (APRA) changes affect the landscape?

Simon Pressley: The recent APRA changes are real… and I think both those markets are already showing signs of slowing already—probably Sydney slowing a bit more so than Melbourne. In Melbourne, however, later this year, two really large employers will be closing their factories forever.... It's not just the direct jobs at the plant, but it's the indirect jobs that are going to have some impact on Melbourne's market. Now, how big an impact? We don't know, but it's never a good thing when you've got tens of thousands of jobs in one city gone within a short period of time.

What other factors should investors be wary about in the coming months?

Simon Pressley: We know that 80 per cent of all new dwellings approved in this country over the last three years have been in Australia's capital city. Eight out of ten new dwellings over the last three years have been approved in Australia's eight capital cities… yet, the eight capital cities accommodate 65 per cent of our population. So those two very, very basic numbers should be an alarm bell to people.

People are saying, "Well, okay. The other 35 per cent of Australia's population live in regional Australia. The new dwelling supply has only been 20 per cent for a 35 per cent population. So where are those regional locations where supply probably isn't going to be keeping pace with population growth?" Now, that encompasses dozens of regional cities, but the supply side of things is going to have a direct impact on the better performing property markets for the next five years.

Will property investors benefit from the so-called ‘Asian century’?

Simon Pressley: We're big fans of that term... 'the Asian century' and the role that Australia plays in that. In no particular order, industries that are going to benefit from it—create jobs, create demand for accommodation—are things like tourism [and] agriculture. [This is] another reason why we're honing in on some parts of regional Australia, [because of] all the investing in some parts of regional Australia that will benefit from that.

There's a lot of Asian people that are now picking Australia for tertiary education… And those universities aren't just in capital cities. There's all sorts of strong regional centres that really play the role of a mini-capital city that have strong tertiary education facilities. In some cases, they're expanding so that extra jobs are created with the construction of these big infrastructure projects.

You think people should consider investing in regional Australia?

Simon Pressley: We're big fans of regional Australia, but that doesn't mean that every region is a safe investment. We can say the same about capital cities as well.

Perth and Darwin are now in their third year of decline. So, it's a furphy to say that capital city means blue chip. Every capital city has had periods of decline before, and will again in the future, and every capital city has long periods of flatness. Sydney had six or seven years where it didn't do too much, so the investors need to take the blinkers off. Australia's a really, really big country and there's lots of gold to be found in certain parts of regional Australia.

Tune in to Simon Pressley’s episode on The Smart Property Investment Show to know more about his advice for do-it-yourself investors as well as his checklist for what investors should consider when looking to regional towns for their next investment.