I reecntly replied to someone who was going to invest in Sydney because he felt that Sydney always led the property cycle. I thought my response may be of interest to other forum members.
You are correct in saying that in the past Sydney has often been the first capital city to recover from a slump and from our research data it seems like it will be doing it again this cycle.
But there are a few things to remember:
1. The strength of the cycle and the timing of the cycle is different in each capital city depending upon its own supply and demand ratios. eg Sydney and Melbourne have been in a slump for almost 2 years Yet Perth and Darwin are still booming despite each of these cities enjoying the same interest rates, Federal Governmet, tax policies etc.
2. Looking back at previous cycles, in each cycle one major city has outperformed the others. In the last cycle it was Queensland with huge capital growth last year and the year before. In the previous cycle it was Sydney. A large surge in property values (as ocurs in these cities) is usually followed by a longer and deeper slump and prolonged recovery phase which normally means the next major Australian property boom has another city which leads the pack in property price growth.
3. I suspect it will be Perth that will outperform in Australia’s next major boom – probably at the end of this decade. Looking back over the years, Perth has underperformed and is currently playing catch up like Brisbane did last cycle.
4. The next property upturn will be led by increasing values in middle and upper income suburbs, not first home owners.
5. There are opportunities in each capital city. Invest don’t speculate.You don’t need to look interstate and speculate where the next boom will be. Get to know your own home turf and find good opportunities there. Look for motivated vendors and buy properties below market price and you will create your own capital growth.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.au5. There are opportunities in each capital city. Invest don’t speculate.You don’t need to look interstate and speculate where the next boom will be. Get to know your own home turf and find good opportunities there. Look for motivated vendors and buy properties below market price and you will create your own capital growth.Hi Michael,
I agree with you comments in part. Getting to know you own turf is of course the starting point. Additionally I don’t see any point investing interstate just for that sake of it.
However, sometimes the best opportunities are not in you own back yard and perhaps depending where you live they may be out of your reach or not the type of investment you are looking for.
No doubt if this investor was looking to invest in Sydney (unless you are talking outer west of something) then he could probably afford to invest almost anywhere in the world.
You are right. Invest not speculate. Facts not predictions.
Cheers
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Hi Michael
Reading the latest reports on Sydney property it seems there might be a prolong downturn. Property has already fallen 5% in most suburbs except some of the more affluent areas. The forecast is for this to continue for the next 2-5 years.
What is your estimation of the length of this downturn?
Have you an opinion on the Canberra market as it seems to be giving conflicting Stats at the moment, I am not sure what is going to happen.
KerwynOriginally posted by kerwyn:Hi Michael
Reading the latest reports on Sydney property it seems there might be a prolong downturn. Property has already fallen 5% in most suburbs except some of the more affluent areas. The forecast is for this to continue for the next 2-5 years.
What is your estimation of the length of this downturn?
Have you an opinion on the Canberra market as it seems to be giving conflicting Stats at the moment, I am not sure what is going to happen.
KerwynKerwyn
You are correct about conflicting stats. Each organisiation calculates their figures differently.This week the Australian Bureau of Statistics released its results for changes in median prices and they differ from Australian Property Monitors who provide statistics for the Reserve Bank[blink] Figure that one out.
Residex which does not report means but uses its own statistical methods has differing results again.
Which is correct? They all are. Figures can’t lie can they? They tell what is being reported.
Which is most representative of their market place?
APM have changed the method they use this month so they claim they are. In the past I have found Residex to give an accurate representation.
As for Sydney the market is still weak, and has had about a 5% drop overall in prices for the last 12 months, but the higher end of the market has held up well. I believe this will continue and the other suburbs will flatten out and gradually increase. It is likly to be generally potive but slow growth starting early next year. Residex supports this view.
The next boom (which is the shortest part of the cycle and the end of the cycle) is unlikley to be till the end of this decade. But it will be too late then. Get set for it over the next year or 2 if you otherwise you may regret it. The cahsed up wealthy have always made their money in the slump stages of the cycle.
Sorry we don’t monitor the Canberra market
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.au
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