False positive for Sydney – Peter Koulizos

False positive for Sydney – Peter Koulizos

Sydney may have recorded strong capital growth over the past five years but its long-term performance pales in comparison to smaller capital cities.  Now that is interesting news and I ask Peter Koulizos from PIPA to explain.

Transcript:

Kevin:  You would definitely be excused for thinking that the property world revolves around Sydney. Here are some staggering figures that have just hit my desk, and I was absolutely amazed with them. Sydney may not have recorded the highest growth figures, believe it or not, over the last 15 years if you look at the long-term performance.

These are some figures that have just been released by the Property Investment Professionals of Australia. Joining us to talk about that is the chairperson of PIPA, Peter Koulitzos.

Peter, I was staggered when I read these figures. Were you surprised as well?

Peter:  I was surprised as well because Sydney has been in the headlines in the last few years, but really, Sydney was just playing catch-up. Because if we go over the 15-year period, Sydney didn’t do much in the first ten years, whereas the rest of Australia did quite well. So really, in the last five years, Sydney was playing catch-up. But even though it was playing catch-up, it wasn’t able to catch up to the performance of all the other capital cities over the past 15 years.

Kevin:  Yes, some great lessons out of this, too, and we’ll pick up on those in just a moment. Can I get some of those stats from you, though, Peter? Tell me about some of the other cap cities around Australia that have actually outperformed Sydney.

Peter:  All right. Sydney property prices increased by 142%. Next was Canberra at 146%, Adelaide at 147%, Perth at 159%, Brisbane at 160%, Darwin at 161%, a bit of a jump to Melbourne at 208%, and if it surprised you that Sydney was the worst-performing city, it really surprised me that Hobart was the best-performing capital city over the last 15 years with a price increase of 220%. In other words, property prices in Hobart more than tripled in the last 15 years.

Kevin:  Yes, steady as she goes, some of these markets. We were talking there about Hobart. I know we’ve been talking about Hobart now for the last 18 months, about how outstanding that market has been, but really, you have to go back over the last 18 years to say “Well, maybe there aren’t really many surprises there.” But that really shocked me.

The established house price index – the weighted average for eight capital cities – was in fact 161%, which was pretty much lineball with what happened in, say, the Brisbane market. I think once again this comes back to Brisbane being consistently a good market when you look at the average across Australia. I think the Brisbane market over the last 15 years was 160%.

Peter:  Correct. Yes, it has been around the average. As you say, Brisbane is a good, steady market. We generally don’t see the big ups and downs as we see in particular in Sydney, but as you mentioned before, it’s steady as she goes in Brisbane.

Kevin:  Yes, 142%. What do you put that down to? That Sydney market is extremely volatile. You get the very high peaks and the high growth, and then you have a big drop. That’s pretty much been the Sydney market, Peter, hasn’t it?

Peter:  It has. And if we went back probably 25 years, we may have a slightly different story, because if we went back 25 years, that would include the preparation for the Sydney Olympics and the Sydney Olympics themselves. There was a lot of economic activity happening in Sydney just before the Olympics and obviously during the Olympics, and then there was a lull.

I would imagine many people would hold properties for 15 years, so if you are going to hold property for the long term, then trying to time the market is not as important. For example, if you were looking to buy and hold property just for five years, then timing the market is very important – when you buy and when you sell is very important. But if you’re going in for a longer-term period, then there are ups and downs in all markets.

The ups and downs are, say, bigger in Sydney than they are in Brisbane, but the beauty about property prices – especially over the last hundred years – is that they have outpaced the rate of inflation, so it has certainly been a very worthwhile asset to invest in.

Kevin:  Yes, a great lesson there for investors to not just follow the herd but really look into the figures and look at the history. This once again highlights the fact that property is a very strong long-term investment.

Peter:  It certainly is. And the other amazing thing, Kevin, is this 15-year period included the Global Financial Crisis, which is apparently the worst financial crisis since the Great Depression, and every capital city – including Sydney – more than doubled in price in that time. Melbourne and Hobart actually more than tripled in price.

So, not only is Australian property a great asset to invest in, but the Australian economy has done particularly well compared to the rest of the world since the Global Financial Crisis.

Kevin:  Yes, a great story and certainly an eye-opener for me and I think for many other people as well. Peter Koulitzos has been my guest. Peter is the chairperson of PIPA, the Property Investment Professionals of Australia.

Peter, thanks again for your time and that interesting insight.

Peter:  My pleasure. Thank you, Kevin.

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Kevin Turner
kevin@realestatetalk.com.au
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