The Perspective for 2015

Posted by Luke Graham

The last seven years have been interesting, with the global financial crisis changing how property markets operate. In fact, opening a property magazine from February 2008 is a curious endeavour. On the back page is an ad: Affordable Queensland Property, Prosperity Ahead. The subject regional area had six years of massive price growth prior to this ad and has actually gone backward since.

Risk aversion has become a stronger factor for investors, particularly after the excitement of high yielding single-industry towns and subsequent losses. The industry that saved our backsides in 2008 is now the industry causing pain for those who gave it too much love.

The cash rate is sitting at 2.5 per cent, with speculation 2015 could see another two rate cuts. From a Sydney perspective, property price growth is beginning to slow and a declining rate of transactions indicate that Sydney’s peak (12 o’clock on the property clock) has likely passed. A rate cut could see the Sydney engine rev back up for a while, but much stronger opportunities are available. Experts are divided on the perspective on Brisbane: some say there are good times ahead, others are not so optimistic. The Blue Wealth office is optimistic on Brisbane in 2015.

Brisbane’s last peak was this time seven years ago and the data indicates 2015 could be the year that Brisbane shines again. Price growth is steadily climbing in an environment where Sydney is showing signs of slowing and mortgage affordability is substantially higher in Brisbane than it is in any other major Australian capital. Rental yields in Brisbane are also greater than those found in comparable cities.

Diversification of economies is now a clear trend. Regional centres have demonstrated what happened to those who relied too heavily on particular industries. Areas like Townsville, Sunshine Coast and the coastal south of Perth are examples of areas stepping away from their volatile roots and into the likes of health care and education. Long term prospects in these areas are strong. Rental demand is cyclically low in Townsville and Perth as a function of the current interest rate environment, but this is a ‘necessary evil’ for moving ahead with a long term outlook. Successful investors know they cannot have their cake and eat it too.

Pockets in Melbourne are proving to be attractive. Gentrification and urban planning are king in Melbourne. Although there has been strong growth on a macro scale, areas representing great value exist that we will be devoting further energy to in 2015.

We still have our eyes on the other capitals and regional centres. We will go into this at the upcoming business partner briefing, so be sure to secure your seat if you have not done so already – it is looking like we will have a full house.

Posted by Luke Graham, on 27th Jan 2015