09 Feb "Still some money to be made" – Josh Masters
We back track with Josh Masters and check his report card of 2016 predictions.
Kevin: Another one of the experts we checked in with this time last year was Josh Masters from BuySide buyer’s agents.
Good day, Josh. Nice to be talking to you again, and Happy New Year.
Josh: Good morning, Kevin, and to you.
Kevin: Actually, we’re pretty well into the New Year, but it’s never too late to say Happy New Year.
Josh, let’s just play a portion of what you said this time last year, and then we’ll come back and check in with you.
Josh: I think we’re still going to see the momentum from Sydney carrying through. While Sydney has had that very, very strong growth – and even Melbourne, as well – we’re still going to see probably 5% to 7% growth over the period as that markets slows down. There’s still some money left in there. I think we’re also going to see a rise in premium homes, let’s say above $1.5 million, probably in Sydney and definitely in Melbourne.
From an investment point of view, we’re going to see probably a lot more influence from those APRA regulations. What we’re probably going to see is a trend through 2016 to those affordable markets with stronger yields. I do see that Brisbane market and even the Gold Coast market through some of the infrastructure projects that are going in there. It’s been flat for so long. It’s a very affordable market especially compared to a lot of the eastern coast cities.
I think we’re seeing a lot of strong yields there, which are 5.5%, 6.5% there, which are really going to be attractive for investors through 2016. I think coupled with infrastructure projects from Toowoomba to Sunshine Coast down to the Gold Coast, I think that’s going to be a real hotspot coming up in 2016.
Kevin: Back live now. Josh Masters, they were your comments this time last year. There were probably a couple of surprises, but maybe we could just replay that again next year and that might be what you might think about 2017. Is that a fair comment?
Josh: Look, Kevin, I think it pretty much is a fair comment. There were definitely a few surprises. I think everyone’s jaws have stayed on the ground watching the Sydney and Melbourne markets continue to go very, very strongly.
5% to 7% growth coming into last year was well under the mark, but to be quite honest, that’s four years of solid growth now. I think it’s definitely unprecedented and we’ll probably see that sort of growth, if not less, for the Sydney and Melbourne markets – definitely in the investor side of it but probably also with owner-occupier markets coming into 2017.
Kevin: Yes, and it’s no wonder, too, that the state government in New South Wales is talking about ways to make property more affordable. Who would have thought that that growth would continue. In fact, I don’t think I’ve spoken to anyone who said what we’d seen in the last year – 2015 – was going to help continue in 2016. So who knows what’s going to happen in 2017 with Sydney.
Josh: Yes. Look, I think the affordability piece is definitely still on our radar. I mentioned that around the Brisbane market, and I think in particular pockets, we’ve definitely seen some solid activity and we continue to look up there because the yields are so good as well, and I definitely there’s some good infrastructure projects coming up that way.
But we’ve also seen some solid activity coming into the Hobart markets, the Canberra markets as well, particularly for the home sector because of that affordability. Hobart is almost going gangbusters now in terms of vacancy rates being so low, rental yields being very high, and capital growth as well, even though it is quite a small market.
I think that those affordable states will definitely be the outperformers as people are looking to put their money into the property market but simply can’t make it over the large hurdlers that are the Sydney and Melbourne behemoths that we see today.
Kevin: Yes, quite a number of the people that we’ve spoken to, probably like you too, have been a little bit disappointed with the growth that came out of Brisbane. I think everyone thought that 2016 was going to be Brisbane’s year but it just didn’t really… Although in fairness you can’t really compare with what continues to happen in Sydney, Josh, can you?
Josh: No, but you do have to be careful of using the same brush to tar the whole city and the whole state. There are definitely pockets within the Brisbane market that have been outperforming, particularly in the owner-occupier stock.
I know the banks have favored owner-occupiers since the APRA regulations came in a couple of years back. They were offering discounts or at least normalized rates, so we were seeing those quality homes close to the city in the $600,000 to $700,000 bracket doing very, very well. That was hitting 8%, 9% year-on-year and that’s nothing to shy away from.
But overall, yes, the state and the city, in particular, has definitely been dragged down, I think probably from the low unemployment rates and the low economic activity. The mining was always going to be a drag on it until we see the job numbers picking up in that state and the money starting to flow back in. I think we are starting to see a little bit of net migration flow back into Queensland now. I think that will be the catalyst for the rises to come that I think everyone’s been waiting for for some years now.
Kevin: Okay. Fast forward this time next year. What are you going to be saying in 2018 about 2017?
Josh: It’s always been a red flag for me for the last couple of years, but I think we’re definitely going to see some impact of oversupply in the unit sector, particularly for Brisbane and Melbourne. I think we will see those prices starting to hit home hard and there will be some discounts in that sector of the market.
The smaller states, where we have affordable stock – Hobart, Canberra, and look, fingers crossed for Brisbane as well – definitely down that more affordable end at the median price point or just under, I think we will see some activity there.
I think Melbourne and Sydney have definitely got to slow down. I think we’ll probably see them really staying static at the end of 2017. I actually foresee probably the same as BIS Shrapnel for the next one to two years following that – at least some very, very flat growth for those two larger states.
Kevin: Josh, always good talking to you, mate, and we will talk to you as the year rolls on. Josh Masters has been my guest. Josh’s website is BuySide.com.au.
Josh, thanks for your time, mate.
Josh: Thanks, Kevin. Have a great year.