08 Jan Property boom in some parts of Australia – Simon Pressley
“There are parts of Australia where we may actually see property booms. It might not be by the end of 2019 – it could actually be in the next six months.” Those are the words of Simon Pressley and the prediction he made when we caught up with him.
Kevin: As we continue to look at where we’re headed in 2019, this being the first show of the year, Simon Pressley from Propertyology joins me and last week we had the pleasure of having him in the show to talk about the highlights and the lowlights of 2018. Simon, you’re famous as far as I’m concerned anyway for your predictions on what was going to happen in Hobart, being the first one to actually come out, and I know a few people have claimed that, but you in fact were the first one on record to talk about what was gonna happen in Hobart. And what are your thoughts about this year for the property market?
Simon: Well 2019, I guess every forecast I’ve read so far about the year ahead has just been full of doom and gloom. And I, I don’t want you to think I’m weird here, but I actually see a number of factors coming together, Kevin, there are parts of Australia that we can start to anticipate, we may actually see property booms in parts of Australia. Might not be directly in 2019, it might actually be six months. It is far from doom and gloom. And I think a lot of that doom and gloom commentary has come from what’s happening in Sydney and Melbourne, which isn’t pretty, but that’s two cities. Australia is actually made up, there’s 175 towns and cities that have got a population of 10,000 or more, 175. But yet so often what gets reported about Australian real estate is a reflection of what’s happening in the moment in Sydney and Melbourne.
Simon: We need to be very very careful about making these really big decisions with expensive assets such as property based on consensus. Consensus is often grossly wrong. You’ve mentioned Hobart, Kevin. In 2014, no one had anything positive to say about Hobart and those who followed that consensus missed out on a wonderful opportunity. In 2011, 8 out of 8 capital cities declined in value. No one was having anything positive to say. 18 months later, Sydney and Melbourne had started a property boom. In 2016, everyone was saying Sydney and Melbourne could never be over supplied. Fast forward 18 months, everyone knows they’re over supplied. And regional Australia, year after year, people say property markets just don’t grow in regional Australia, or there’s no jobs in regional Australia. 200,000 jobs have been created in regional Australia in the last two years and they have been unquestionably the best performed property markets in Australia in 2018.
Simon: So be very careful listening to consensus. The future is a rosy one. The key at the moment is APRA. Someone needs to talk some common sense into APRA. You can’t have a healthy economy without the availability of funds and they’ve made that tight. People can borrow money, but there is some really good quality credit that are getting declined. So that common sense will prevail eventually with that, and when it does, large parts of regional Australia, I will use the term, a boom is possible.
Kevin: I guess we also have to be mindful of how we need to, not so much protect, but foster the investor. Make sure that they’ve got an environment where they’re comfortable to invest because we need that kind of stock going forward. Not everyone wants to buy a property.
Simon: Yeah that’s true. We need confidence, and there’s every reason for us to be confident. I read a great speech by the reserve bank governor, Phillip Lowe only a couple of weeks ago and why it was such a great speech is he reminded Australians that it is not as bad as what was reporting on a daily basis. I think whether you’re a first home buyer, whether you’re an investor, whether you’re looking to renovate, the public needs to be reminded that things actually aren’t that bad. Our unemployment rate is now 5% and falling. That’s low. We’ve had two consecutive calendar years where we’ve created more than 300,000 jobs in a single calendar year, two consecutive years. That doesn’t happen very often. It might have only happened two or three times in Australian history. We’ve two consecutive years of that. We’ve got population growth of consistently more than 350,000 people per year. We’ve got housing supply a surplus in two cities, but our other capital cities and most of regional Australia aren’t over supplied and in fact in a lot of cases are really tightening. We’re seeing a significant reduction in things like vacancy rates and building approvals.
Simon: The economic story is a positive one, it is an improving one, and that’s a key fundamental for a strong property market. You know in this calendar year, Kevin, we will see our first federal budget surplus in ten years. That’s a big achievement. If we think about the economic troubles we’ve been through post GFC to get to that point is a big achievement for this country and something that we need to be celebrating. There is a tourism boom world-wide that Australia will continue to benefit from. There’s an agricultural and advanced manufacturing story which is very exciting for job creation.
Simon: So there are some really strong fundamentals for those who are prepared to actually focus on those and not just the the here and the now.
Kevin: So Simon, could I read into your comments, that you’re fairly confident about 2019?
Simon: I am, but obviously the best way to get people to think about this is the Sydney and Melbourne booms, those who made the most money were the ones who actually looked at the fundamentals and backed their judgement on that and they would have bought in say 2012 when the market wasn’t growing, but the underlying fundamentals were strong. Those who did that, they made the money. 2019, those who do that same process and look at the underlying strengths in locations and buy then, when that growth occurs, late 2019, 2020, they will benefit 100% of that. Our 8 capital cities, they’re not going to see an enormous amount of price growth in 2019. But it’s definitely not doom and gloom. I think Sydney and Melbourne, I don’t anticipate a crash, because their economies are too strong, but we need to understand that it’s the APRA tightening that has probably been the cause of about 7% of Sydney and Melbourne’s price declines.
Simon: APRA credit tightening is not going to be there forever. We’re going to have a lot more problems in property markets if that continues, so that will go. But what we really need to understand the economic strengths behind things and focus on that. Perth has got quite an exciting outlook. It’s had a terrible run the last ten years. The economic stuff that’s coming out of western Australia is exciting. Just this week I read that mining boom mark II is about to unfold over the next few years. So don’t be surprised at all if two, three years now from now we’re hearing that Perth is Australia’s best performed capital city property market. Regional western Australia, Queensland, New South Wales and Tasmania have a very exciting outlook. Not in 2019, but in 2010, I couldn’t rule out double digit price growth in places like Brisbane, Adelaide, and Perth.
Simon: The benefit from that, you need to be in the market.
Kevin: In the market, yeah. That’s right.
Simon: In the market.
Kevin: Exactly. Think long term, think long term.
Kevin: And fundamentals, yeah. Simon, thank you very much. I look forward to your contribution through 2019. Thank you so much again for your wonderful insight. Simon Pressley from Propertyology. Thanks mate.
Simon: My pleasure.