620x400-market-update

 

So where is the market today?

There’s a lot of commentary that house prices are falling – particularly in Melbourne and Sydney. This could well prove to be the markets taking a little rest after their recent growth spurt, particularly given the banks are under the spotlight which is affecting borrowing. It is likely they will get a 2nd and even 3rd wind. And the numbers on population and job growth and land supply, highlighted below, all point in that direction.

We have never seen this record population growth, lowest interest rates and the advent of Chinese buyers all coinciding before… Ever! It’s a good time to invest in land in high growth areas.

Trust the banks? Not likely.

I don’t read the general news but the bank royal commission and the fallout is gobsmacking. Westpac using the ‘all monies’ clause to take proceeds from sale of a home without a mortgage and ANZ now facing criminal charges for price fixing. Just the stuff they have admitted to is a reminder to us, not to trust the banks – and the reason why I’ve always suggested splitting your loans.

Budget Woes

Government expenditure is up 4% - with welfare spend up 8%. The single Pension today is circa $23,000 per annum– only $1,000 above the poverty line. When the pension was introduced it was 80% of the average income and now it’s 25%. I can’t help but think the government will continue to make cuts as it did last year by reducing payments to over 330,000 pensioners.

The population is spiking Land values!

Across the country land values jumped 12.7% in the main capital cities over the past year. Melbourne was up 31% to $330,000 or $825 per m² on a median land size of 400 m². Outer Sydney increased another 12% for land per m² last year, whilst the SEQ market saw a 4.9% to 26.9% gain as the market built(suburb specific). The average land rate across SEQ is $594 per m² for a 442 m² median block size. Adelaide also saw land values jump 11.6% last year which is positive.

The real driver is the 388,000 in population growth last year which was actually short 280,000 people needed to cope with the record 420,000 new jobs created and the 248,000 workers who retired. These numbers are staggering and the obvious reason why land prices are well-outperforming house prices.

SEQ is particularly interesting market where job growth is outperforming population growth by 40% and has a massive $45bn in infrastructure spend over the next four years – the largest in the state’s history and second largest spend per capita in the country.

Total population growth for SEQ is forecast to be 2.2% per annum, which is higher than most capital cities. However, Ipswich is growing at 3.3% which, while house prices have languished the last few years, has seen solid uplift in land values per m².

Springfield is the city of the future with $15bn invested into the area already, and an end value of $85bn by completion. It’s also a high achiever with 11.7%p.a. population growth, already having the infrastructure with rail, the Orion Shopping center ( destined to be the biggest in Australia), University of Southern Queensland and the Mater Private Hospital to name a few.