"Sydney caught me by surprise" – John Lindeman

"Sydney caught me by surprise" – John Lindeman

When we asked John Lindeman this time last year what he thought was ahead for 2016, he predicted that Sydney would slow down and we would see a more defined 2 market situation. So, how has he reacted to that?


Kevin:  As we check in with another one of our experts who we asked this time last year about what they thought about 2016, my next guest is John Lindeman.
John, welcome to the show and thanks again for giving us your time.
John:  That’s fine, Kevin. Hello, everyone.
Kevin:  John, just to refresh your memory, I’m just going to play a small portion of what you said this time last year. Here’s what you had to say then.
John:  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 different directions.
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 it’s had over the last few years, but I don’t think it’s going to be a bubble, so 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 got going at the moment. I think they’ll continue to drive the regional house markets in New South Wales upwards over the next few years.
Kevin:  John, just looking at your comments there, what happened in Sydney? Did that surprise you, that that growth continued the way it did do during 2016?
John:  Yes. I didn’t think it would continue that sort of momentum for another year. That I think surprised everyone.
Kevin:  It certainly did.
John:  And of course, the fact that Brisbane hasn’t really done much, that was another prediction that I think was a bit unexpected.
In general, I think 2016 was just a year of unexpected results. We had Footscray winning the AFL and Cronulla winning the NRL. And then we had poor old Malcom nearly losing the election and then of course, David Cameron losing Brexit and poor old Hillary losing the presidential election.
I think it’s just really thrown everything into disarray and people are quite worried about what’s going to happen in terms of the property market in the future.
Kevin:  Do you think we can expect more of the unexpected this year?
John:  I think so, but I don’t think it’s going to be in the property market. Certainly the Trump effect, that’s a big unknown. China and the USA seem to be heading for some sort of trade war. And there could be a financial crisis unfolding in Europe.
But when I look at what’s happened over the last, say, 10 years, we’ve had one crisis after another – there was Iceland and then Ireland and then Spain and Portugal, Italy, Greece, Britain voted to leave the European Union – and yet all that time our property markets continued to grow, especially Sydney and Melbourne. So it hasn’t really affected us in any substantial way at all.
Kevin:  Your comment that I played just a moment or two ago, you mentioned there that there would be two markets. Is it exactly two markets, and is that capital city and regional? How do you define that?
John:  I think the two markets, you have Sydney and Melbourne and then you have pretty much the other capital cities. The other capital cities are suffering mainly because of the ending of the mining boom. Brisbane and Perth in particular have been hurt by that.
It’s interesting when you look at Melbourne’s growth, and I mentioned the 10-year growth was about 125% growth in 10 years, and that was the best performer of any capital city. When you look at what the average growth is, it was 8.3%, which is exactly what the annual average growth rate for Australian property has been since 1901. So even that growth is not exceptional.
Kevin:  Did any surprises come out of the regional markets for you, John?
John:  I predicted that there would be a lot of regional growth in New South Wales because of the huge amount of money that the state government has from stamp duty, and they’re spending it all on duplicating the Pacific and Prince’s Highways. That’s reducing your traveling time. It’s making it a lot safer for tourists and retirees. I predicted that that growth would occur, and it has been quite substantial both north and south of Sydney.
I think the same sort of thing is likely to happen in Melbourne. With the huge growth we’ve had in Melbourne, it’ll start to ripple out. It’s already hit Geelong and it’ll probably go to Bendigo and Ballarat, as well. They would be the areas I’d be looking at.
Kevin:  John, what are your predictions for New South Wales and I guess more particularly for Sydney for 2017? Do you see that continuing to grow?
John:  I think it has to slow down. I also said in that last comment that it wasn’t a bubble, it wasn’t going to bust, and I still hold to that. This growth is not exceptional. As I said, it’s about the average long-term growth rate for Australian housing, so there’s no cause for panic. But it is a bit of cause for concern in the other states because that growth hasn’t flowed through in a way that it has in previous booms, so I think that they’ll catch up over the next few years.
Kevin:  Do you think that outstanding growth in Sydney has overshadowed somewhat some reasonable growth in Brisbane? I know you said that it was a bit disappointing, but it did grow; it didn’t come back. Do you think that we expect too much out of Brisbane?
John:  No I don’t. I think everyone just expected that Brisbane would be the next city to boom, and it hasn’t done that. But it’s very much due to the fact that there’s an oversupply of properties at the low price end of the market. You have all the mining construction workers are now busy building houses in the outskirts of Brisbane. We’ve seen some huge developments occurring there. You can buy a new house in a place like near Bribie Island for just over $300,000. It’s an extraordinary opportunity for first-home buyers to move into the market, and the same goes for Perth.
But at the high end of the market, it’s fine. There’s no oversupply and there’s growth occurring in both Brisbane and Perth when you look at the higher priced properties.
Kevin:  John, look forward now to this time next year. What do you think we’re going to say about 2017? Maybe just a summary of some of the points you’ve made today.
John:  I think we’ll see that there’ll be a strong ripple effect coming out of both Sydney and Melbourne, that that’ll continue, so there will be a lot of growth in the regional areas in Victoria and New South Wales. Also there’s a good chance that the mining boom could start up again, and so there could be a bit of a bounce back in some of these areas that have been disparaged, like Moranbah and so on. I think that they’ve hit the bottom and it’s time for them to start moving up.
Kevin:  John, always great talking to you. Thank you very much for your time. John is from Property Power Partners. We look forward to catching up with you during the year, John.
John:  Yes, I look forward to that, too. Thanks very much, Kevin.

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