Now that we’re a quarter of the way through the year and our property markets have had a chance to show their hand, it’s probably a good time to see how property is performing.
BY MICHAEL YARDNEY
RP Data has reported its March quarter house price index results and the findings were encouraging.
Once again, the latest stats will disappoint the doomsayers who frequent the property forums and for the last four years have been predicting an apocalypse.
What the stats show
Overall, Australian dwelling values were unchanged across the eight capital cities over the first three months of this year. In fact, RP Data-Rismark’s hedonic index data suggest that Australian dwelling values have not budged at all since the end of October 2011.
The tide is turning
Of course there is not one property market in Australia, so while the market is flat in general there are markets within markets, each pulled by a multitude of influences and, as a result, sectors within sectors are performing at differing speeds.
Clearly our property markets have slumped over the last 12 months, as the following table shows, but the latest results suggest we are now in the consolidation phase of the property cycle.
Units outperformed houses in Australia’s major capital cities by a wide margin during March. Capital city apartment prices increased by 0.9 per cent during the month to a median of $400,000 while detached house prices increased by just 0.1 per cent to a median of $464,500.
We’re entering the stabilisation phase of the property cycle, where buyers are returning and slowly taking up available stock, but not really pushing up prices yet.
This means our property markets are likely to remain soft this year, but should keep consolidating.
One encouraging sign is that first time buyers are back, applying for loans at levels not seen for two years. Remember, first time buyers are typically a good barometer for changes in affordability.
How soon things turn around will depend a lot on buyer confidence, and this will depend upon what’s happening overseas, how our government performs and what happens with interest rates.
Does this mean you should put your money under the mattress or buy gold bullion rather than invest in property?
You already know what I’m going to say don’t you?
Property is more than just an investment – it is a fundamental human requirement. Everyone needs a roof over their head, whether they rent or own their own home. As a basic necessity, housing will always be in demand and it will always have value because we simply can’t live without it.
The long-term future is assured for those who invest in property.
At some points in the economic cycle, property values will rise strongly and at other times they will languish. When people can’t afford to buy property – when price growth slows because of decreased demand – people end up renting, so investors win by getting better returns. And that is currently happening as rents rise strongly.
Of course… this also means that buying any property and hoping it will make a good investment just won’t work at this stage of the cycle.
You need to buy the right type of property that:
• Has a level of scarcity, with continuous strong demand by owner occupiers, to keep pushing up its value, and tenants to help subsidise your mortgage;
• Is in the right location – one that has outperformed the long-term averages;
• You buy at the right time in the property cycle (that would be now in many states), and for the right price.
Then hold it as a long-term investment and reap the rewards.
Michael Yardney is the director of Metropole Property Investment Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Investment Update blog