Brisbane and Hobart picked as the potential big improvers this year

Brisbane and Hobart picked as the potential big improvers this year

 

Who would have thought that Brisbane and Hobart would be picked as the potential big improvers this year?  Hear why Simon Pressley from Propertyology is investing in those two areas right now

Transcript:

Kevin:  There was an interesting comparison I saw recently where Simon Pressley, who we’ve had on the show before from Propertyology, was making a comparison between the Brisbane market in Queensland and Hobart in Tasmania, talking about the similar areas and picking both of them, actually, as somewhat hot spots for this year. Simon joins me.

Simon, thanks for your time.

Simon:  Always a pleasure, Kevin.

Kevin:  Interesting to see. I’ve never really seen anyone make that kind of comparison before between Brisbane and Hobart. I think that Hobart market, in particular, is one that I’ve been waiting for almost a decade to see improve. Why are you picking Hobart? Brisbane, to me, is a bit of a standout, but I can’t understand Hobart.

Simon:  Great question. I’ll probably surprise you and all listeners, Kevin. Propertyology has been investing in property in Hobart for two years. We obviously keep our trade secrets close to our chest, but we always have a keen interest in property economics, because we only work for investors, and property shelter. Wherever there are going to be improving economies that are sustained, logic suggests there will be more shelter.

For a couple of years, we’ve been quite excited about the outlook for Tasmania’s economy albeit very conscious that the recent past has had some challenges. It fits very well. The industries that drive Tasmania’s economy are really starting to prosper from the Asian Century, which is a money trail we’ve been following for some time.

We gave Hobart the green light in terms of macro level research and started investing there two years ago. Affordability is one thing – and Hobart has always been more affordable than other capital cities – but it’s economic makeup that excites us the most.

Clients who we got in there, say, 18 months ago have already achieved in the vicinity of 15% growth. Outside of Sydney and Melbourne, I suggest there are very few places anywhere in Australia that have achieved that. Hobart very rarely gets the headlines because it’s Tasmania, it’s that little forgotten island that not many people think of.

Kevin:  You’re talking about great growth there, 15% over a couple of years. Are there particular areas in Hobart that are improving better than others? Is it down by the water or are there some suburbs that are standout?

Simon:  We’re not suburb-specific. We’re street-specific. One of the luxuries that people have in Hobart is it’s water everywhere, really. On the mainland here, it’s rare for us to have a property with a water view, isn’t it? But in Tasmania, it’s everywhere, and they sort of take that for granted.

No particular suburbs. As I said, we’re street-specific. We always place a lot of value on buying properties in close proximity to jobs. We take a keen interest in zoning changes, traffic congestion. There are fundamentals we follow in every city, not just Hobart.

Kevin:  Those barometers that you’re talking about are fairly longstanding. They’re nothing new. You touched earlier on some of the things, the economy of that area. What has changed there to pique your attention?

Simon:  Probably the reason people don’t consider Hobart is for so long, it’s unemployment rate was so high, but when unemployment rates are reported, it’s generally, “Tasmania is doing this; Queensland is doing that” which is not really useful for a property investor, because we want to know about the city. Hobart’s unemployment rate hasn’t been that bad, and now it’s actually below the national average.

Its main industries are really starting to prosper. In no particular order here: tourism is going off the Richter scale. The number of international and domestic visitors going not just to Hobart but to Tasmania broadly is the fastest rise of growth in all of Australia for its visitor numbers. That directly affects jobs in cafes, hotels, restaurants – the retail and accommodation sector, basically – so it’s off the planet.

The Chinese president made a formal visit to Hobart about 15 months ago now. It’s the first time that a Chinese president has ever visited Tasmania. All the images from the two or three days he spent there were beamed back to their homeland for 1.3 billion people every single day. Every meeting he went to was beamed back there, so that has directly affected the tourism market.

Its advanced manufacturing sector has a wonderful opportunity. The agricultural products on Tasmania are world class, whether it’s beef, cheese, or various beverages. The manufacturing sector is growing, which creates jobs, which creates demand for accommodation. The third main industry is its international student market. Hobart is unofficially “university city,” and the universities are expanding, largely to tap into the Asian market.

Kevin:  Let’s have a look at Brisbane because you mentioned the two cities Hobart and Brisbane as the two areas that you are pretty excited about. The indicators there for Hobart or for Tasmania tourism, Chinese interest, manufacturing, and students, have they also applied in Queensland or in Brisbane, or are there different measures there for you?

Simon:  We are less certain about Brisbane’s economy. We’ve felt for some time that Queensland has a lot of potential in its economy. But for a variety of reasons, its confidence isn’t as good as what it’s been in, say, Victoria and New South Wales, and we’re still waiting for the signs that that’s going to happen. We think investing in Brisbane is not a bad decision; pound for pound, though, I would buy a property in Hobart over Brisbane every day of the week.

I’m not just saying that; I’ve done that. Two years ago, I purchased in Hobart for my own portfolio. Brisbane is more affordable than Sydney and Melbourne, yes, but it’s always been that way, so in isolation, that shouldn’t be a reason for any investor to buy in Brisbane. The job market in Brisbane has been improving, but it’s still patchy. When we follow the job’s numbers, one month, it’s good growth and the next month, it’s come backwards a bit. We’re just not getting that consistency there.

Kevin:  I want to get your opinion on the Gold and Sunshine Coasts. Before I do that, I want to take you out to the Ipswich area, which is having phenomenal growth, and we’ve talked about that in the past. Is that an area where you would tend to look because of what’s happening out there? There are going to be some big improvements in employment, as well.

Simon:  Yes, I think on the employment front and the general confidence front, Ipswich has it over Brisbane, I feel, at the moment. Its job growth is better. They’ve always had a very proactive, very energetic mayor out there, Paul Pisasale. He’s a real go-getter. So there are a number of good things on the job front for Ipswich.

Tempering that, though, is the supply sort of things. There’s a heck of a lot of land on the outskirts of Ipswich, always has been and it’s very developable land, as well. The big Queensland developers have land-banked that for some time, so they control supply.

Ipswich certainly, definitely will go okay. But it’s a market where supply will probably always be a little bit ahead of demand. When the dynamics happen in that order, you tend to get growth but not spectacular growth like we’ve seen, say, in Melbourne and Sydney.

Kevin:  Gold and SunshineCoasts, what’s your view on what’s happening there?

Simon:  The Gold Coast, we’ve been bullish on for probably 18 months now. Its economy is arguably one of the best in Australia at the moment, and as far forward as we can forecast, it looks like continuing to be that way.

It’s not all related to the Commonwealth Games, although there are some big projects that are being built for the Games. Of course, as we get close to the Games, it’ll be great for tourism trade, as well. But there have been a number of very significant infrastructure projects for the Gold Coast, which has created lots of jobs and improved amenities.

People do need to be mindful, though, that mayor Tom Tate is a developer by trade and you always need to keep your eye on the building approval volumes on the Gold Coast, especially in the apartment market. It’s not in oversupply now, but it certainly has the potential to be that way in the coming years.

The Sunshine Coast, it’s a lifestyle location. It will go okay, but we’ve never been greatly excited about the SunshineCoast. A beautiful part of the world to live, but whatever broader Australian property markets will do, Sunshine Coast typically follows that sort of trend, nothing unspectacular.

Kevin:  Simon Pressley, thank you very much for that update and that inside information on the Hobart market. Simon Pressley, of course, from Propertyology.

Thanks for your time, Simon.

Simon:  Any time, Kevin.

Tags:
Kevin Turner
kevin@realestatetalk.com.au
1 Comment
  • steve weingarth
    Posted at 10:57h, 23 April Reply

    With my experience investing in 3 States, there is little value and yield if buying relatively expensive property within 10 km of CBDs but better value and yield in middle to outer suburbs. To me the best bargain area in any capital city is the South Morang- Mill Park Lakes area in Melbourne’s Northern suburbs- family friendly,good amenities,train 22 km to CBD. With houses around $400000-how long can this last when a 1 br apartment costs more nearer the CBD. The best bargains in Brisbane are along Morton Bay South at Redland Bay and Victoria Point, about 30 minutes to the Gold Coast and 40 mins by train to Brisbane CBD at nearest station Cleveland. With rental returns at around 5% after insurances,rates and agent commissions why bother putting say $400 000 of Super in a 3% return investment. You also get rent rises -CPI plus and capital gains.These are great areas to live in and make Sydney look very expensive in comparable suburbs. The best value in Sydney for safe family friendly lifestyles is the Penrith Valley area, with great amenities on the doorstep of the Blue Mountains. 4 br new houses around $730000 are available in Glenmore Park and next door Mulgoa Rise with mountain and bush outlook renting for about $600 a week, 8 mins drive to the booming Penrith CBD and easy access to the M4 motorway,25 mins into Parramatta. In Lane Cove, lower North Shore of Sydney, you pay $900000 plus for a new 2 br home unit -so go west for affordability,value and yield and the capital gains have been great there too. Good luck investing and renting-hope this helped the discussion. Steve W

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