John Lindeman – Australian Property Market 2016

 
Our guest today: John Lindeman from Property Power Partners.
 

Transcript:

Kevin:  Welcome back to the show. Joining us this time to give us his view on 2016, John Lindeman who is the Director of Property Power Partners. Let’s get all the Ps in line there.
John, how are you?
John:  I’m very well. Thanks, Kevin.
Kevin:  Good. Happy New Year, too.
John:  Thank you very much, and yes, I wish you all the best for the coming year, as well.
Kevin:  Well, that’s what we’re going to talk to you about to make sure that we get all of our ducks in a row. What do you think we’re going to be saying about 2016 this time next year, John?
John:  I would hope you’d be saying, “Why didn’t we buy in the areas that John Lindeman predicted?”
Kevin:  That’s right.
John:  Or “Why did we buy?” which would be even better.
Kevin:  We’ll get to that in just a moment. John, you’re predicting what? A fairly healthy market for 2016?
John:  I think so. I think in some parts of the country, it will be very, very healthy indeed and in others, there will be a time of continuing price correction, so I really see two markets going in the different directions.
Kevin:  Is it going to be much different from what we’ve seen in 2015, last year, as to where those markets will emerge – the good ones and the not-so-good ones?
John:  I think that the good one will continue to be New South Wales. I think Sydney is pretty much over its high growth, record growth that it’s had over the last few years, but I don’t think it’s going to be a bubble. The growth will probably slow down there.
But I think New South Wales is where the money is. It’s a budget that’s very healthy, a booming economy, and there’s a lot of infrastructure development occurring in Sydney and New South Wales generally, which are some of the biggest infrastructure development projects we have going at the moment, and I think they’ll continue to drive the regional house markets in New South Wales upwards over the next few years.
Kevin:  John, what do you think will be the enemies of the market this year? Is it likely to be consumer confidence? Is it interest rates, or is it affordability? What’s going to put a dampener on the market, do you think?
John:  I think what’s happened over those two years – and will continue to happen – is that with the ending of the mining boom and a lot of the construction workers returning back to the cities they came from and then moving more into housing construction, what I’m seeing is I’ve just come back from a trip to Perth and massive unit development occurring over there and housing development, as well.
What that’s leading to is a surplus of supply. To a lesser degree, we’re seeing the same thing in Brisbane, but we’re seeing the opposite occurring in Sydney, so there’s just still not enough housing being built.
I think they’re the two main things. The ending of the mining boom is changing the nature of housing markets in terms of these areas that had huge shortages of supply now going to experience surpluses. I did not predict a boom for Brisbane; I said it was one of the areas that would continue to have moderate growth, and I think that’s going to slow down over the next year. Perth is likely to continue going backwards, unfortunately.
Kevin:  You said at the opening that hopefully people will be delighted with the fact that they moved into the areas you’ve suggested. Are you going to suggest a couple of areas for us, John, that we might want to focus on in 2016?
John:  What I can see happening is that, as I mentioned before, the New South Wales government has a huge cash injection from stamp duty. They’re embarking on huge infrastructure developments around Sydney. I don’t think that’s going to turn the market around there because it’s already booming anyway and these are really catch-up improvements.
But when you look away from the capital city to the massive infrastructure development projects, such as the duplication of the Princes Highway south and the Pacific Highway north all the way to Brisbane, these are massive projects.
We recently drove along both of those highways to have a really good look at what was happening. What you can see is the rent demand is escalating as thousands of workers have to live in towns like Kempsey, Taree, Coffs Harbour, Grafton, and Ballina while they’re working on the highway duplication. The local authorities there are urging investors not to engage in rent gouging, but of course, they are. There’s very, very few rental vacancies, so you can see rents really starting to ramp up in those cities and also price rises will then follow.
The difference I see between this and, say, a mining boom is that the improvement of the highway will actually convert these towns into very desirable holiday and retirement areas. I think that price growth will occur after the highway is completed in the next four years. Those towns that I mentioned, Kempsey, Taree, Coffs Harbour, Grafton, and Ballina, when you go south now at Jervis Bay and Batemans Bay, all have a lot of growth coming their way in the next few years.
Kevin:  That’s an area for you to focus on then. John, on that point, we’ll say thank you so much. All the best for 2016. Look forward to working with you through the year, as well.
John Lindeman, thank you so much for your time.
John:  It’s been a pleasure, Kevin, and may I wish all of your listeners a very prosperous 2016.

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