01 Feb Simon Pressley – Australian Property Market 2016
Our guest today: Simon Pressley from Propertyology.
Kevin: Welcome back into the show as we continue to have a look at what’s going to happen with the property markets in 2016. Joining us this time from Propertyology, Simon Pressley.
Simon, we asked you to have a look at into your crystal ball. What do you think we’re going to be saying about the property markets this time next year?
Simon: This time next year, Kevin, if the media are consistent, which they usually are, whatever is happening in Sidney and Melbourne is what I’ll be reporting on a national sense. We’re probably going to be saying property markets are flat, which is where I think Sidney and Melbourne will be by the end of 2016.
Kevin: You think we’re in for a pretty flat 2016. Late last year, towards the end of the year leading up to Christmas, we did talk about how some of the smaller markets around Australia could be a nice choice. Do you still share that view?
Simon: I think it’s a common mistake of property investors. They get too focused on not just the capital cities, the three big ones – Sydney, Melbourne, and Brisbane. Traditionally, there’s a lot better markets out there than the three big capital cities. That’s certainly going to be the case in 2016 and many years yet.
Kevin: Looking back on 2015, were there any surprises for you?
Simon: The biggest surprise to us, Kevin, was Melbourne. Our 2015 market outlook report is still up on our website today, so people can look back at what we did forecast 12 months ago. Back then, we described Melbourne as a market of mixed fortunes, and we were surprised that 2015 Melbourne’s jobs were as strong as what they were and we were also surprised that what is a significant oversupply housing hasn’t taken grip yet. That may be a forecast 12 months ahead of ourselves.
Kevin: You think that’s likely to be the case in 2016, a bit of an oversupply, and particularly in units?
Simon: Particularly in units, yes, but also on the outskirts of Melbourne, broadacre land development has been unfolding for a few years there, yes. We still think Melbourne will be one of the better performing capital city markets in 2016, but most of that growth will be in the first half of the year. We’ve maintained for a couple of years, Kevin, that we think 2017 is going to be the start of a very, very ugly period for Melbourne.
Kevin: Okay. Where there any disappointments for you? Are there any bandwagons you wished you had gotten on that you didn’t?
Simon: Not too much ones that we didn’t get on, but probably the biggest disappointment in general is Queensland’s inability to fulfill its economic potential. We didn’t predict the very early call of the Queensland state election at the start of 2015, and more importantly, we didn’t anticipate the result. It was really a 50/50 call. In the end I think it was one seat that resulted in an eventual change of government. We did actually downgrade our outlook according to the market as a result of the state election, and we didn’t anticipate that that result would happen.
Kevin: What’s your advice for anyone wanting to start a portfolio this year?
Simon: Education is always a key thing. I think it’s great that investors get motivated and excited, but there’s this tempatation to jump in, place too much emphais on the property itself rather than the market, and are probably too easily influenced by the things that they can easily read on the Internet these days.
A lot of the things that the broader investor takes as gospel or theories about property markets is contradicted by the historical evidence, so we would say get educated, develop a good team of advisors around you and be guided by them.
Kevin: What are some of the market indicators that you watch out for that we can learn from if we’re looking around Australia. We touched earlier in this show and late last year about looking at some of those smaller sweetfish type markets. What are some of the indicators that you’d recommend we should be keeping an eye on?
Simon: Great question, Kevin. I maintain that the most important indicators for property investors aren’t actually found looking at historical property data. While things like vacacy rates and the number of days on market or sales volumes, they’re interesting but it’s really a reflection of what’s occuring in a market now, and the property asset class, the best decisions are made when we form opinions about the medium to longer term, the five- to ten-year period.
The answers to those more important questions are going to be found in industry trends. Really understanding Australia’s economy and processing property as a commodity called shelter. If we get a greater understanding of different industry drivers and which industries have the healthiest outlook, that’s going to be more useful to us to direct us into particular property markets.
We feel that for the foreseeable future, the industries in Australia with the best opportunity include things like agriculture, tourism, education, and health. If property investors look for locations with those industries within its economic profile, they’re more likely to land on a good performing property.
Kevin: Simon, just before we close off, have you got some examples of those?
Simon: Yes, I do, Kevin. Looking around the country, Western Australia, places like Bunbury and Busselton in the state’s south. In Tasmania, it’s places like Launceston and Burnie and Devonport that have a healthy future. In Victoria, it’s Sheppatron, Bendigo, and Ararat. New South Wales is spoiled, really: Griffith, Leeten, Armidale, Dubbo, Tamworth, Narrabri. We think that they all have good outlooks.
In South Australia, it’s Port Lincoln and the Barossa. Northern Territory, Katherine is something that we have some interest in at the moment. In Queensland, which has a lot of regional locations, Townsville is going to improve, Cairns will remain strong. Rockhampton, Toowoomba. Gympie is one to watch at. The Gold Coast we’ve maintained has potential to be one of Australia’s best performing markets, and the Scenic Rim is one to watch, as well.
Keith: Always good talking to you. Simon Pressley from Propertyology.
Thank you so much for your time and your insights, Simon. Great spending some more time with you.
Simon: Any time, Kevin.