Property hotspots still plentiful despite market slowdown

While the short-term reaction to recent disruption to residential property has been downward pressure on prices in some markets, there’s no need to panic.

History shows that Australia’s property market has withstood far more substantial disruptions than changes to how investors are taxed.

Ultimately, we still have the right market conditions for rents and prices to rise, because we have shortages of new homes and of homes available for rent.

And that shortage is not likely to ease anytime soon.

Australia is supposed to be building 240,000 new homes a year under the National Housing Accord.

In May, the nation approved 17,019 dwellings. In terms of the ultimate objective, that’s a train wreck, as it’s a continuation of sub-par approval levels.

And keep this in mind - approvals are the generous measure, because many approvals do not proceed to construction.

Approvals are not homes. They are not keys in doors. They are not roofs over families.

Approvals are pieces of paper saying someone might build something if the financing works, if the builder survives, if the project stacks up, if the trades can be found, if the materials arrive, if the infrastructure is there, if the developer does not abandon the job, and if the final cost does not blow the project to pieces.

Only completions house people.

Fundamentally one of the strongest indicators of future price growth is growing demand, particularly growing demand at a time of shortage.

With Australia’s population tipping over 28 million, the demand is there.

Price growth suburbs still dominate

Some commentators would have us believe that Australian property prices have fallen off a cliff since the announcement of Federal Budget changes to how property investments are taxed.

But the data does not back that up. In the 12 months to May, there were 2,233 markets throughout Australia that recorded double-digit median price growth. That figure increased to 2,257 markets in the 12 months to June.

Double-digit price growth is highest in Queensland (771 markets), followed by New South Wales (478), Western Australia (392), South Australia (295), Victoria (189), Tasmania (58), Northern Territory (51) and the ACT (23).

In the 12 months to May there were 534 markets which recorded a decline in median price – that dropped to 518 markets in the 12 months to June.

Property markets with upside

There are still good investment opportunities in all states, which offer future price growth.

In Greater Brisbane, the apartment market in Bowen Hills has strong future growth prospects. The median unit price is still within the affordable range at $695,000 and it has plenty of fundamentals for rising demand. It is well connected via public transport, is just a few kilometres from the CBD and its neighbouring suburbs are about to enjoy significant infrastructure upgrades thanks to the 2032 Olympic Games build.

In Sydney it is the apartment markets that are offering the best options with lower buy-in prices and stronger yields.

The Canterbury-Bankstown LGA sits in the “sweet spot” of that equation. It has a large population, established transport connections and major employment, health and renewal projects. Its deep unit market offers lower entry prices, supported by tight vacancies and strong rental demand.

In Melbourne, suburbs within the City of Frankston offer solid opportunities. Frankston North has the low house entry price of $711,500 and it takes on average 30 days to sell. Within the LGA, recent hospital expansion, rail connectivity, urban renewal and changing demographics all reinforce demand; it is a market set for future growth.

Forget the rhetoric - look toward the data. What it shows is that property prices in many locations continue to grow.

As always, it’s essential that investors weigh up locations carefully and select those with all the fundamentals in place, which will drive further demand and growth into the future.