Which Big City Will Rise AND Fall?

Which Big City Will Rise AND Fall?
Tuesday May 31, 2016 - Phil Anderson

 

This is a trend I’ve been particularly highlighting in recent weeks and months, as it seems to be one of the least spoken about topics of our National property markets. Most investors are now aware that Australian property markets move in cycles, with very few of them maintaining a steady stream of continual growth year in, year out (though believe me, they are out there). However, the "Cycles Within Cycles" phenomenon explores the notion of the one market being at different stages of the property cycle at the same time, including one of our biggest cities. Let me explain.

Markets are now splitting and splintering into cycles within cycles much more than ever before. Some property values will ‘rise’ and some will ‘fall’ even in the same suburbs. This is what we refer to as "Cycles Within Cycles". We are already seeing this even in some of our best performing suburbs.

Now, more than ever, I believe you need to look deeper than national, state or even suburb forecasts. In particular, those areas that will be most significantly impacted by the current emerging glut of high rise units in many of our cities.

I think we could actually see this market record solid positive growth in some property types and suburbs, AND negative growth in the unit market in the most heavily supplied areas.

What this means for you is that you need to filter much of the news and statistics you are reading. You cannot think of an area like Brisbane as one market and you cannot think of the different types of dwellings as one consolidated group either.

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For example, the Victorian suburb of South Bank has a vacancy rate (at the time of writing) of an overwhelming 10.43%, largely due to it's influx of available units in the area. Where as neighbouring Prahan has a vacancy rate of just 4.09% (which is still well above my expectations). These are neighbouring suburbs just 5kms apart, but the difference for investors could be extreme.

To be clear, I'm not advocating or discrediting either of these areas. But this is an example of how an area can have two very different cycles within the one region. As always, asset selection and choosing the right property type in this case is crucial.

With certain areas massively increasing the amount of unit developments in their infrastructure pipeline, we will see this phenomenon more and more. Certain "Big City" markets will be able to absorb this glut of units as it springs to the market due to their high population growth fuelling demand. Other markets who do not boast such impressive population forecasts, however, will not be so fortunate.

As we always say... Do your research. Look past the hype.

To hear more about property types to avoid, as well as markets that are positioned well for investors, claim your free State Of The Nation Report now.

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