With so much going on in the Property and Finance space currently, I thought that now would be a great time to catch up with my friend and leading property analytics researcher Terry Ryder (Owner and Creator of Hotspotting).
I was able to speak with Terry recently to ask his opinion on investment and the current climate. I wanted to share the content of our discussion with you all and hope you find it both interesting and insightful.
Terry – in your opinion is it a good time to invest in property now?
It’s time for investors to get off the fence and start taking action in real estate markets.
The revival in major city markets since May has been largely driven by owner-occupier buyers, with investors sitting on the fence and watching events unfold.
Investors exited the Sydney and Melbourne markets in droves last year as it became evident that the boom in those cities had expired.
The first half of 2019 was a perfect storm of negative factors for real estate – the lead-up to the Federal Election put a brake on decision-making, finance was hard to obtain, big city prices were trending south and media was largely pessimistic.
There’s certainly been a turnaround since then hasn’t there?
The turnaround since May has been profound. The Federal Election result led “a series of fortunate events” which unfolded in rapid succession: an easing of lending restrictions, a series of interest rate reductions, lower taxes for many Australians and a change in the tone of media coverage.
Initially, we saw an improvement in sentiment. Then, as that translated into action at street level, the real estate data started to improve. Sales activity picked up, auction clearance rates improved and price trends improved.
Terry – have you got any data to back up this improvement in sentiment?
Real estate data is now positive for most markets. Here’s what the indicators are telling us:-
Vacancy rates: Vacancies are low in most cities. Sydney is the only capital with a vacancy rate above 3%. Vacancies are much lower than last year in Brisbane, Perth, Adelaide, Darwin and Hobart. Melbourne is a little higher but still only 2%. Canberra vacancies are up but remain just 1.2%.
Rentals: Residential rents have risen in all capital cities except Sydney in the past year. Figures from Domain and SQM Research confirm the biggest growth has been in Hobart, which has the lowest vacancies. Rents are up 3-4-5% in Canberra, Adelaide and Perth, while Brisbane and Melbourne are up slightly.
Clearance rates: Throughout August, September and October, Sydney and Melbourne have been recording auction clearance rates above 70%, compared to 45-50% a year earlier. Buyers are competing for good properties and listings are relatively low.
Prices: August and September both delivered positive price data in most cities, notably in Sydney and Melbourne. SQM’s Prices Index early in October recorded monthly price rises in Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart. In annual terms, there’s evidence of price uplift in Brisbane, Adelaide, Canberra, Hobart and even in Darwin. Sydney and Melbourne remained down in annual terms, but only by 1-2%, much better than six months earlier. There have been strong rises in many regional markets also.
Investors drifted away from real estate in 2018 and early 2019 because it seemed the growth party was over. Now, all the evidence points to recovery.
The latest lending figures showed the first signs of investors returning to the market. I expect subsequent months to show investors coming back in greater numbers.
Thanks Terry I look forward to chatting with you more in the upcoming months.