17 Jan The property ‘hits’ of 2019 – Anna Porter
There is no shortage of opinions about what is likely to happen in the property market this year but Anna Porter’s views are likely to ruffle some feathers. She does not hold back.
Kevin: Looking ahead is something we like to do. Trying to get a crystal ball out to help with what the market might do in 2019, Anna Porter has some very strong views. Anna is a valuer and property commentator from Suburbanite. She is the CEO there and she joins us.
Kevin: Happy New Year, Anna. I know we’re well and truly into the new year, but it’s the first time you and I have spoken in 2019 so happy new year.
Anna: You too, you too.
Kevin: Okay, now you’ve got some very strong views on what’s going to happen in 2019. No shortage of people coming forward to tell us what they think. So what do you think are going to be the hits this year?
Anna: There’s certainly some hits for this year. Even though there is an overlay of a Royal Commission and we’ve got an election looming, there are some markets that are really well positioned to push through that. So Adelaide would be our top pick for the state that’s going to see the most prosperous growth and rental market for 2019.
Anna: This is off the back of a huge amount of job creation and projects that are being … the spend into the billions or 10s of billions on some of these projects. They’re not just roads, they’re not just wind farms, they are job-creating projects like the Royal Adelaide Hospital. At $2.4 billion, that’s just not a major project for Australia – it makes it the most expensive single building in Australia – it puts it on the world stage at number seven for the most expensive building in the world at the moment.
Anna: You’ve got your submarines, you’ve got your frigate fleet which is a $39 billion project. There’s about a decade of work coming out of that. As well as a number of other projects that are going to create thousands upon thousands of jobs. That’s a real underpinner for that market.
Kevin: Yeah, a real turnaround in the South Australian market on the back of a couple of years ago. All that doom and gloom about the car industry. So it seems to have rallied around, Anna.
Anna: That’s very true. Even last week of late there’s been an announcement that one of the big players in solar and battery power is taking up part of that old Holden plant there up in the northern section and they’ll be creating another 1,200 jobs through their initiative. So it’s a really interesting time for Adelaide. Adelaide is doing it … They’re smart, they’re doing it the right way. They’re looking at how to create jobs for the future and create sustainability.
Kevin: Of course one of the big influences for the year is going to be the election whenever it is held the first half of this year. What do you think is going to be the impact of that?
Anna: Yeah, so it tends to make the market stand still a little bit. Canberra is in particular impacted by that. So we see at the moment Canberra has been very buoyant throughout 2018, which is fantastic. It’s had some good growth, the rental market is very tight. We’ll see a bit of a pause button there for the first half of the year while that election conversation and narrative is taking the forefront. But we see the back half of next year that Canberra will power through and it will go from strength to strength. Because it is at the right time in the cycle, it does have good jobs and good employment, even if there is a change of government. The seat is still there, the job is still there. It’s just who is sitting in it. We usually see Canberra do very well after an election, even though it might sit still in the lead up. But that can create a buying opportunity. If you’re the right buyer, you can get in at a good price and then see the growth off the back of that.
Kevin: One of the great lessons out of 2018 was the growth of the regions or the potential to get into the regions. So I’m interested to note here that looking outside of Sydney, you’re looking a little further down the road at Goulburn?
Anna: Yeah, so Goulburn has done fairly well over the last few years. As a major regional hub, and we’re not obviously going to compare it to capital city markets, but talking about regional markets it’s done fairly well but there’s a bit of sustainability there built off the back of Canberra. As people are getting priced out of Canberra, Goulburn is an affordable alternative for them. This market is going to stay nice and steady. We don’t expect it to set the world on fire being a regional area, but it is going to remain steady off the back of what’s happening through Canberra. So that’s a good outlook if you want something that’s a bit more of an affordable buy with that slightly stronger yield position than you’ll potentially achieve in Canberra.
Kevin: Yeah, it’s an important junction between Sydney and Canberra as well. Let’s take you across to Western Australia; Perth is on your watch list.
Anna: It is on our watch list. So we’ve started to see after a number of years of negative growth and some real backward trends in Perth, we’ve started to see that really stabilise the last six to 12 months, which is fantastic. Now looking forward into the rest of 2019, there is real opportunity in I think the back half of the year to see that as a good buying area. The growth has stabilised, we’re not seeing much more negativity coming out of that trend.
Anna: The one thing we’re really waiting for though is that vacancy rate to come down a little more. The vacancy is still a little bit high for our liking. We do see a strong correlation between how the growth trends work and how the vacancy and rental market perform. Once that vacancy comes down I think the right buying opportunity will start to sift through the Perth market. But do be a little careful getting too regional in WA; you do want to be in that real centralised hub. The regional markets are still feeling some of that pain from years gone by.
Kevin: Mm-hmm (affirmative). You make an interesting point too about Tasmania, which we’ll come to in just a minute. Before we do that, let’s talk about Melbourne. You reckon there’s a bit of a sting coming for Melbourne, especially in the metro area?
Anna: There sure is. Melbourne’s had phenomenal growth, double digit growth, year-on-year for the last probably three years is what our data is showing, thereabouts. So now it’s getting a bit toppy, it’s hitting that ceiling, and we’re going to start to see 2019 be the year it will turn a bit of a corner. So like Sydney has done through 2018 and turned that corner, Melbourne will follow. It will be quick and it will happen very quickly where the market really does come to a stop.
Anna: For those investors that have looked a bit further afield into areas like Geelong for example, they will probably be a little bit more steady for most of the year. It probably won’t turn as quickly as what we’ll see in Melbourne, because Melbourne right now is starting to have a bit of an affordability crunch. That’s when buyers will come reeling back and start to retract. I think this year’s going to be the year we’ll see that really settle in.
Kevin: Anna, you say 2019 is going to be the year of reckoning for Tasmania?
Anna: It sure is-
Kevin: A lot of people are still predicting there’s a bit more growth there to come? You don’t agree?
Anna: No, I don’t. The property market has a lot of speculators, and people that haven’t necessarily seen the cycle for years and years and decades gone by and done the research. They just look at the last 12 months. Even some property investment gurus so to speak look at the last year and at the beginning of 2017 and 2018 they were saying, “Wow, this is cheap. You buy into Hobart and you pay 250 or 260 for a property and you get 320 a week rental return. What could go wrong?” What that’s created is an influx of interstate investors. Not migration or population growth. The population growth for the last year has only sat at about 1%, which is abysmal.
Anna: So they’ve got a lot of interstate investors driving prices up, which has created about an 8 or 9% growth for the year, depending which data you look at. 8 or 9% growth. So everyone is thinking, wow, this is the story coming true. This is the good news story. But it’s underpinned only by investors. It’s not underpinned by the local market. It is certainly not underpinned by job creation. The research is showing for every five people that will migrate to Tasmania, there will only be one job created. So a lot of the projects on the table are only concept and political talking points, they’re not going through to actually turning ground in terms of projects. They’re not job-creating a lot of them. There is a real lack of those fundamentals that create a good property market, like population growth, migration drivers, employment drivers. They’re missing.
Anna: I’m likening Tasmania to what the Gold Coast has been in years gone by; it is smoothed and bust and I think the latter part of 2019 into 2020 will be the year of reckoning for Tasmania where we will see that growth undoing because there’s going to be vacancies setting in with the heightened investor activity. There’s going to be a number of distress sales especially if there’s an interest rate rise. Even though it might not be with the RBA but just in the backend with what the banks and lenders are doing, if we see that interest rate component start to go up and vacancies start to settle in, you’ll see people retracting out of that market in a big way. The locals cannot support that growth into the future. The locals are quite sick of all the interstate investors from Sydney and Melbourne flocking in and pushing their prices up. So it will come unstuck.
Kevin: Finally, Brisbane. What do you see happening there?
Anna: Brisbane is a great market. Obviously the unit market has been struggling and will continue to struggle. If we saw the likes of a 20% decline or even more in that unit sector in the next year, I wouldn’t be surprised. The same goes for Melbourne and Canberra. Those unit markets are oversupplied, so I’d stay well away. But in terms of freestanding houses within about half an hour of the CBD, those properties are still going to stay fairly steady and will probably see a little bit of growth coming through for 2019. Setting up for a good couple of years ahead. We’ve got the Herston Quarter, we’ve got the Queen’s Walk project. These are billion dollar projects sitting right in that CBD area.
Anna: Setting aside the oversupplied unit market, the freestanding houses are really going to benefit from the job creation of these projects. They’re not turning around next year, a lot of them are earmarked for 2020 onwards. But the next three to five years, over 2019 you’ll start to end in the right direction. The next few years we’ll see some good growth come though.
Anna: However, I do warn that South-Eastern pocket, down around Logan all the way through to Ipswich; too much supply again similar to Tasmania. The fundamentals aren’t there. The job creation is not there. There’s an oversupply issue, and it’s being driven by investors. Those markets will start to feel the pain coming through very soon. Again, vacancy and the values will start to retract and we’ll start to see some real disconnect in those markets compared to what’s happening in Brisbane proper. So Brisbane proper is a good outlook, but avoid that South-Eastern Queensland pocket, because there will be a bit of a blood bath too come through.
Kevin: Great outlook on the national market there, Anna Porter. Anna is a valuer and property commentator and CEO of Suburbanite. Anna, thanks for your time.
Anna: You’re welcome.