May 2017 Market Update

Cycles – East Coast

Nationally, the average new lot size is now down to 424m² and I predict that in this cycle the norm will be 300m2 lots with an average price of $1,000 per m² on the 3 main East Coast capitals.

Most of the action in this cycle, so far, is on the east coast. This makes sense, as Sydney, Melbourne and South East Queensland (SEQ) are receiving 90% of the national population growth. Last year circa 55,000 new lots were built and sold in Australia. However, in the last quarter of 2016 alone, we saw a total of 5,228 lots sold per month in the same areas, with a record volume set in South East Queensland.

In 2016, 93% of new jobs created in Australia, were in the 3 main east coast regions. That was 144,964 new jobs – with 55,000 new lots. Truth is, we don’t know the full impact of the attached housing building boom, and its impact on housing supply levels;
similarly we don’t really know how Apps like that of Airbnb are impacting the housing demand levels either; what we know is that they are taking rental properties out of the permanent pool and using these for tourists, students and short term stays which are all high growth demand areas on housing.

Size matters

As mentioned, the national average lot size is 424m2 which has reduced from 575m² in the last 8 years and the average lot sale price now is $287,727 compared to $207,000 in 2008. As for our land, it has increased from $360 per m2 to $678 per m² in 8 years.

My predictions are: the average land size will be 300m² and price at $1,000 per m² in this cycle – So why would I say that? Because we are nearly there. As you can see the average price is already $287,000 and affordability is continuing to be a pressing issue, so my view is lot size will come down faster than land price increase. The benchmark, as always, is Sydney, and today (if you can get one) new lots sell for $465,000 for a 396m² lot.

Smaller lots are already a reality. In parts of South Easter Queensland there are 100m2-120m2 lots which sell for $130,000 or $1,300 per m². The house that sits on them is a 2-storey, 120-150m² house that sells for an affordable sub $350,000.

Nationally now only 14% of all new stock is less than 300m2 but nearly half of all stock produced is less than 400m².

 

Job growth impact

But let’s finish with job growth because last year’s numbers were a stand out. Job growth is important to us as wealth builders and, as mentioned earlier, the latest data released indicates that the 3 main capitals are accounting for 93% of all jobs created.

Even more interesting is the jump in numbers last year on the 5 year average. New jobs created in the 3 main east coast centres grew by 50%. Melbourne was up a massive 83% on 5 year average to 72,786 with Brisbane also bouncing back strongly up 45% and Sydney up 23%.

Adelaide was up over 800% on its 5 year average but from a ridiculously low base – so I’m not ringing the bell there yet. However, I did fly to Adelaide last month to have a hard look at property and get a feel for opportunity. Stay tuned…

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Carole Sharkey

2 weeks ago

Thanks John
You’re a credit to life!
Greg, my husband, and I have just an evaluation on our Sydney home today. We have only one investment property through you, and we want to invest again!
We were in the process of getting another one in Melbourne this year, but the bank pulled out on us. It was a good property too!
Oh well, fingers crossed.

Andrew Klopf

1 week ago

G’day John, thanks for your incredible yet simple insights, on investing and life, I have just started yoga and are feeling the benefits already. I am looking forward to joining your group of investors as soon as possible, cheers😊

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