The surprise property market that is the hottest in Australia
The best performing property markets over the long term are not in the big cities as might be expected.
Anyone serious about property investment knows it is a long-term game and that inevitably the longer you hold onto an asset the better the return.
Despite that, much of the analysis and commentary about the market is generally about how the market has performed in the past month, quarter or year.
When looking at the long-term performance of Australia’s property market, many might be surprised at which market comes out on top for the best long-term capital growth
It’s not Sydney, even though it has Australia’s highest property prices. It’s not Perth where the market is booming and many are overpaying just to get a foothold.
In fact, it’s a market that has not had a lot of attention in the past two years - regional Tasmania.
Property Investment Professionals of Australia (PIPA) analysis shows in the past 20 years median dwelling values have increased the most in regional Tasmania – by a staggering 233 per cent - with the median house price rising from $169,000 20 years ago to $449,000 in mid-2024.
In general terms, the best capital growth has been in Australia’s smaller capital cities or more affordable regions in the past 20 years. In terms of capital city markets during that period, Adelaide tops the list for the strongest growth, followed by Hobart and then Brisbane.
The data from PIPA helps dispel one of real estate’s greatest myths, that you get the best capital growth in the biggest cities – and that prime real estate outperforms affordable.
According to CoreLogic data, the median hold period for properties in Australia, whether an investment or owner-occupier property is 8.8 years, which means half of those owners sold before they even hit that mark.
Unfortunately, many sold too early to take advantage of the high long-term capital gains.
Just as buyers can get caught up in media hype about hot markets and end up buying at the top of the cycle, owners can also get caught up in doomsday predictions about property markets bottoming out and sell too soon.
We saw it happen at the start of the pandemic. Plenty of uninformed commentators were sprouting about how the market was going to collapse and nervous investors, worried their properties would soon no longer be worth what they paid for them, sold up.
If only they’d held on a little longer. As the pandemic took hold so too did Australia’s property boom, with prices soaring in both capital city and regional markets throughout the country.
Investors need to hold their nerve. The property market operates in cycles and even strong markets will have periods of low or no growth.
Inevitably, if you’ve done the due diligence and invested in the right place, the market will come back and grow again.
Property investment is all about timing – timing spent analysing the market and time spent holding your asset.
The best way to pick the right place to invest now is to look to the future, not past performance. Follow the infrastructure spend – that’s what will help you identify where the future demand will be.
Infrastructure spending leads to better resident amenities and jobs, both of which are big drivers of demand for property.
And the one thing that inevitably leads to property price growth, whether in the short or long-term, is growing demand.
