Based on her knowledge and experience as a property valuer, investment adviser, market commentator and author, an expert shares some of the markets in 2019 that will provide good yields and growth to property investors and those that are better left alone.
The first area that Anna Porter, CEO of Suburbanite, listed to avoid was Tasmania. Largely because of the market’s volatility even amidst a relatively better cycle, compared to Sydney and Melbourne, Tasmania should be avoided.
When Sydney and Melbourne started to soften, the Tasmanian property market became one of the potential hotspots across Australia. Investors are flocking into the state to take advantage of properties that are sold at $250,000 to $300,000, with at least $350 of rent per week.
However, a market largely driven by investors that is not supported by economic fundamentals could be incredibly volatile, according to the property expert.
“Right now, Tasmania's had a good year. Hobart's had about eight to nine per cent growth, so most people who haven’t been around as long are thinking of it as a really good opportunity. But it's not being supported by job growth—for every five people that move to Tasmania in the next three years, there'll be one job created and that's not enough.”
“It's not underpinned by population growth, it's not underpinned by employment drivers, it's not underpinned by the locals paying higher prices because they're earning more money—none of that is there. The fundamentals are wrong.
“When we get a bit of vacancy because there's not a big enough population there, rents get discounted, interest rates go up, the economy tightens, then you start getting distressed asset sales. Get a few of those, you start to have this flow on effect where that whole market collapses,” she said.
The Hobart market may have had a good run in 2018, but Ms Porter believes that it will have its ‘reckoning’ this year, along with most parts of Tasmania.
“Tasmania’s had a good year but that will be wiped out towards the back end of 2019 into 2020 with that boom-and-bust effect.”
Ms Porter also advised investors to steer clear of the Darwin property market, which is currently retracting, as well as the markets of Sydney and Melbourne, which have both peaked and are expected to flatten before they fully recover.
Unless the investor is willing to commit to these markets for the long-term, supported by stable cash flow and financial buffers, she encouraged them to seek opportunities somewhere else in the near future.
According to Ms Porter: “The investor needs cash and they need to want something that they're going to tuck away for 10 years. There's some bargains for both homebuyers and investors but you've got to push through a lot of pain. It's going to be a couple of hard years ahead.”
On the other hand, on Ms Porter’s property market watch list for 2019 are Western Australia, Adelaide and Canberra.
Particularly in areas within a 30-minute drive to the city centre, investment opportunities are available from $350,000.
“There are some pockets to the north I would avoid. If you head up north. you'll get a real quick feel for what I'm talking about. You can buy there for under $350,000. That's why we put our benchmark at about $350,000 and up,” Ms Porter said.
The Australian Capital Territory also offers good buying opportunities as it continues to grow actively this new year.
According to the property expert: “It's at the right stage of the cycle. We cannot get enough rental properties for agents there. The rental market is very hot.”
Canberra’s property market may go into a pause before and during the election as most people choose to refrain from making long-term property decisions. However, investors need not worry about any negative moments. “It just stops,” Ms Porter said.
During this time, investors can take advantage of the lack of competition to snag a bargain across the capital city.
Straight after the election, Ms Porter expects the market to resume its growth cycle.
“It will continue to grow because there’s strength there. Canberra is a really good market but you need to be playing about $600,000+,” she said.
Additionally, regional hubs may also provide good investment opportunities over the year. Ultimately, Ms Porter advised investors to be a bit more cautious about the strategy they implement and make sure that it suits the condition of the market as well as their personal and financial circumstance.