By the numbers: Capital city residential property wrap up
An ASX long term investment report has revealed that property was the best performing asset class in Australia for the entire decade prior to 2016 (returning 8 per cent per year on average). That fact confirms what we know already: if you buy right you will get a return on your investment, whether you’re an investor or an owner-occupier.
The first step towards buying the right property is understanding the market in which you’re buying. To help you take that vital first stride towards successful property investment, we’ve put together a summary of the five biggest capital city markets.
CoreLogic RP Data has Sydney ahead of the pack in terms of value growth – as usual.
CoreLogic RP Data has Sydney ahead of the pack in terms of value growth – as usual. For the year ending October 31 median dwelling price in the city increased by 10.59 per cent, reaching well over the much maligned $1million mark.
There are signs that the constant growth in the city will begin to slow, however. NAB’s Spring Housing Market Report forecasts that from September 2016 to December 2017, houses in Sydney will only increase in value by 0.1 per cent, while units will fall in value by 1.2 per cent.
Interestingly, SQM research shows that the average rent for a house in Sydney has increased by 4.5 per cent over the past year and that yields sit at just above 3 per cent on average.
As a result, investors should consider other areas throughout NSW. Illawara is a great example: it’s been one of the fastest growing areas in the country recently, recording a 12 per cent increase in value gains for the year ending August, according to an NAB report.
Par for the course, Melbourne has had the second largest value growth for the past year. The median value for all dwellings grew by 9.13 per cent, putting the median price at just under $850,000. Units also showed reasonable growth, but remain reasonably affordable with a median of $545,000 – more than $200,000 lower than Sydney’s.
Similar to Sydney, Melbourne’s average rental yield is just over 3 per cent.
NAB forecasts also suggest that Melbourne’s growth will soon slow, expecting house values to grow by 0.3 per cent and units values to fall by 2.7 per cent.
The widely held opinion is that this is due to an oversupply of housing, and units in particular.
The average rent for houses in Melbourne has shown more subdued growth, increasing by 2.6 per cent per cent to $489 over the year, while units decreased 4.1 per cent to $374. Similar to Sydney, Melbourne’s average rental yield is just over 3 per cent.
Brisbane has seen more measured growth recently, with median values increasing by just over 4 per cent for the year ending October 31. The median value for units in the area decreased slightly during the same period.
The slowing of the mining sector is reportedly dragging on Queensland’s economy.
The slowing of the mining sector is reportedly dragging on Queensland’s economy, reducing demand for housing and population growth. As a result, value growth in the housing sector will continue slowly with detached dwellings estimated to increase in value by 1.9 per cent, according to the NAB.
Oversupply will take its toll on unit prices and we are likely to see them fall by as much as 1.8 per cent by the end of 2017. Over the year, rent for units in Brisbane showed a slight increase up to $370, while the average rent for a house fell 2.1 per cent to $441.
The Gold Coast might prove a more promising investment, with strong economic performance and infrastructure improvements pushing the median house value up by 5.3 per cent, making it the strongest performer in the state.
Despite a fairly lacklustre economic performance in Adelaide, buyer sentiment appears positive.
CoreLogic shows that Adelaide’s median dwelling value has grown by 2.45 per cent over the year, up to $468,000. Over the month ending October 31, however, values dropped by an alarming 2.39 per cent – a trend that will be problematic if it continues.
Despite this, NAB forecasts have house and unit values growing by 1.6 per cent and 0.7 per cent until December 2017, respectively. Despite a fairly lacklustre economic performance in Adelaide, buyer sentiment appears positive, which may be helping to hold up property values.
The average rent for houses in Adelaide has shown little change, staying at the $362 mark, while average yield remains solid at just under 4 per cent. Promisingly SQM research shows that units in Adelaide have an average rental yield exceeding 5 per cent. Such a property would likely come at a low cost, and provide a solid cash flow positive investment.
The picture for Perth isn’t quite as rosy as the other capital cities. CoreLogic shows the median dwelling price has decreased by 3.6 per cent over the 12 months to October 31.
The NAB predicts a flagging mining industry and decreasing population growth will add to Perth’s problems in the future, placing further downward pressure on values. In fact, the average unit and house values are expected to decrease by 2.7 and 3.8 per cent up to December 2017, respectively.
Despite low demand, construction is continuing at high levels putting downward pressure on both rents and yields. SQM shows the average rent for houses has fallen by 11.7 per cent to $425, while the average yield is now comparable to Sydney’s at just over 3 per cent.
With sound knowledge of each capital city it’s easy to make the right investment decisions. Get in touch with a local real estate agent today to find out more.