Values may be cooling in Australia’s major cities, but investors who timed the capital city markets right could be about to trigger a new round of price growth in some surprise locations.
Sydney and Melbourne’s respective property booms may have ended, but astronomical price growth is set to continue having flow-on effects for the rest of the Australian property market, according to CoreLogic RP Data head of research Tim Lawless.
Data from the company’s monthly Hedonic Home Value Index indicates that Melbourne and Sydney both suffered declines during the November period, by 3.5 per cent and 1.4 per cent respectively.
The result may be an indication of what is set to come over the next year or two, according to Mr Lawless.
“I think we’re probably moving through the peak now. The number in November for Melbourne was certainly a substantial fall, but I’d be surprised if we saw month-on-month falls to that magnitude going forward, but without a doubt I think we will see those marketplaces starting to cool down."
But judging on historical figures, the fall won’t be significant, according to Mr Lawless.
“Historically, your peak to trough falls tend to range somewhere from five to 10 per cent and they last 18 to 24 months, so they’ll probably be somewhere in that range. Generally what you see is a downturn in the marketplace followed by a period of stability.”
Based on the substantial gains experienced in both markets over the past three years, newly cashed-up investors and homeowners in Sydney and Melbourne will still be in a comfortable position to diverge into the traditional holiday markets – a behaviour evidenced by current price activity in these areas.
“We’re starting to see those dollars flying back into your discretionary assets like holiday homes, partly due to some wealth rebuild post-GFC – you’ve got to remember that back in 2008 a lot of those homes simply flooded the market at the time when everyone was looking to offload their discretionary assets, but now we’ve seen a lot of equity being built in Sydney and Melbourne particularly, and some partial wealth rebuild from the share market and superannuation funds,” Mr Lawless explained.
Among the areas set to pick up on this trend are south-east Queensland, northern NSW, Tasmania and even sections of embattled Western Australia, according to Mr Lawless.
“I think south-east Queensland more broadly is one of the brightest opportunities when you consider it hasn’t had the run of gains that Sydney and Melbourne has, the jobs market is now finally picking up – that’s been one of the missing pieces of the puzzle. I think they’ve started to attract migration into that corner of the state; [it] doesn’t have the same affordability constraints, yields are substantially higher than Sydney and Melbourne as well," he explained.
“Brisbane, Gold Coast, Coast, even extending down to Byron – that’s the lifestyle effect we’re seeing broadly driving markets like Cairns, Gold Coast and Sunshine Coast benefit from that as well. They’re also seen as satellite locations to Brisbane."
But the injection of funds is likely to have an effect beyond the states of NSW and Queensland, according to Mr Lawless.
“Hobart is looking like another opportunity as well. It’s got the equal best yields with Darwin, jobs growth is picking up a little bit; there’s not much population growth but I think we’ll see that demand from lifestyle buyers looking to enter the broader Tasmanian marketplace.”
He added: “Even places like Margaret River over in WA would be classified as a lifestyle area that’s bucking the trend of the downturn in broader WA."