20 Jan Michael Yardney – Australian Property Market 2016
Kevin: As we continue to have a look at what’s going to happen this year with our markets and also reflecting back on some thoughts about 2015, joining us this time is a regular on our show, Michael Yardney from Metropole Property Strategists.
Michael: Hello, Kevin.
Kevin: Happy New Year to you, too.
Michael: All the best to you and your family, Kevin.
Kevin: Thank you for that. Interested to see, Michael, that you are predicting 2016 to be a boom year.
Michael: Yes, Kevin, but maybe not the boom year some people are expecting. I believe it’s going to be a boom year for scary stuff in the media – things like house prices aren’t affordable, world economies stalling, interest rates are rising not falling, Australia’s going to go into recession.
Kevin, we’re going through a seminal year where the markets are changing. The strong markets we had in Sydney and Melbourne in particular are going to drop from fifth gear to maybe third gear, and that’s going to create a lot of negative headlines, and it will scare some investors in the market.
Kevin: What do you think of the factors affecting housing markets this year?
Michael: Well, I see consumer confidence falling in the first half of the year, particularly in those people interested in property because of a lot of the negativity that’s in the media. There’s going to be continued concerns with China’s economy slowing, the European economy having trouble, the terrorism, and things like that. There’s also going to be some local issues with a weaker economy, unemployment, and APRA tightening the screw on investors.
Kevin, there are a few of the negatives. But there are heaps of positive things that are going to underpin our property markets, as well.
Kevin: Let’s have a look at a couple of those, Michael, if we may.
Michael: I think interest rates are going to remain at historic lows throughout this year and very likely to drop at least once if not twice again.
We’re going to still have continued strong population growth to our capital cities. Kevin, the Australian Bureau of Statistics is suggesting our population is growing by one person every one minute and 32 seconds, so there’s already been a couple of new people come here since we’ve been speaking. They’re mainly going to come to our four big capital cities where the jobs are, and in particular in the next year or two, to Sydney and Melbourne where the service industry jobs are.
Kevin: What about overseas investors, Michael?
Michael: Kevin, I think they’re still going to be a strong influence on our property markets because as the Australian dollar remains low, they’re going to keep ploughing money into what they see as a safe political and economic haven.
The other factor is going to be that people are still feeling wealthy from the value of their homes. People in Sydney and Melbourne, their houses have doubled in value in the last five or six years, so they’re still going to – even though the markets are tapering off – start upsizing, downsizing, moving home.
I see that as the year goes on and our government gets its act into gear, an improving local economy in the second half of this year will increase consumer and business confidence, and all of that is pretty good for property, Kevin.
Kevin: Yes. As we’ve come to learn, too, Michael, and was highlighted during 2015, there are so many different markets around Australia. What about some of the other markets like Perth and Darwin?
Michael: Kevin, I can see that unfortunately, there are some negative effects in Perth and Darwin. Perth has still got a bit of a way to unravel from its excesses of the previous couple of years from the mining boom, and there are actually very few growth factors in the Darwin market.
On the other hand, some of the other smaller markets – Tasmania, Adelaide – they’re probably going to keep bubbling along and maybe at the rate of inflation. I think this is also going to be a reasonably good year for Brisbane.
Sydney and Melbourne may end up having maybe about 5% capital growth over the year, and Brisbane would probably catch up to that, as well. But, Kevin, lots of markets within those markets – some segments will underperform, and there will always be those that will do a bit better than others.
Kevin: Wonderful, mate. Sum it up for me in a couple of paragraphs. What do you think we’ll be saying about 2016 at this time next year?
Michael: Those people who could see past the mixed messages and work their way through the fragmented markets are going to find good investments that will see them through. There will be less competition for them, but I’d be very, very selective with property purchases.
As always, my strategy has been to buy properties to which you can add value, so even if the market isn’t going to work out for you, you can do the heavy lifting through some renovations or development.
Kevin: Great talking to you, mate. Happy New Year once again. Look forward to working with you during 2016. Thanks, Michael.
Michael: It should be an interesting year. Kevin, thank you.