Property - The State of the States' Capitals
by John hopkins_Executive Chairman
Many clients often ask us what the property market is like in capital cities around Australia, and whether they should invest in property outside of their own capital city. For a brief overview of what's happening where, I've written a summary on current property markets in Australia's capital cities.
HOBART
Tasmania is definitely a beautiful place in which to holiday, but that doesn’t make it a great place to invest in property? Battery Point, Sandy Bay and Bellerive are very special, and Salamanca is a wonderful place to shop, dine out or enjoy its Saturday market. And compared to the inner urban precincts of the major capital cities on the mainland, it’s still possible to purchase a harbourside apartment or house in, say, West Hobart, for what would seem a comparatively good price. But the simple fact is, Hobart has a population of just over 200,000 (and Tasmania itself, around 500,000), so that underlying continuing strong demand, which is an absolute must for real security and flexibility, simply isn’t there. In our firm opinion, the city is therefore not an appropriate place in which to invest.
BRISBANE
The capital city of the sunny state (beautiful one day and perfect the next) has been, is, and will continue to be a fine place to buy quality property investments. With its population size and growth, the huge infrastructure spend planned to continue for the next decade, its strong economy consisting of tourism, rural activity and resources, all combine to make property investment a sure thing.
But the key to successful property investment in Brisbane is different to our other capital cities because you not only have to select the right locations near the city centre and, very importantly, close to public transport, but you must also select the appropriate ‘type’ of property for each particular location.
In the meantime, I must encourage you not to be seduced by all that South East Queensland chatter, by the beautiful resort locations, or by the frequent bouts of eloquence around the economic activity and growth in the regions. The spruikers, developers and estate agents attempting to sell their property wares in that south east corner will try and influence you with statistics about population growth, economic activity and dwelling shortages. But we, in our turn, would like to remind you that those figures always include the property markets of the Gold Coast, Redcliffe Peninsula, Brisbane and others, and the only way to make a fair judgment is to consider each of those markets separately. The beautiful resorts of Noosa and Port Douglas are great, and many have a fantastic time visiting the Gold Coast, but resort property is too vulnerable to economic cycles to ever be considered a solid investment. Cairns and Townsville are also spoken of with great confidence in regard to their importance and economic activity, but they have neither the size nor economic independence to give you appropriate continuing security for a long term property investment.
Brisbane is a great market to purchase a property investment in; just make certain it’s the right property
DARWIN
Darwinians certainly become excited about the development that’s occurring in their city and, it’s true, the Harbour front and Cullan Bay precincts are both attractive and important. As with Hobart’s Salamanca market, Darwin’s Mindil Beach market is really something to behold. But from a property point of view, Darwin is still a country town - a frontier outpost. Again, like Hobart, the city hasn’t the population (about 120,000 people) to compete with either the depth or importance of a major metropolis that is the prerequisite from a property investment point of view. And when you consider that the total population of the whole Territory doesn’t even amount to 250,000 people, there simply isn’t the necessary economic activity to have confidence in this property market – neither Darwin nor the Territory as a whole – as an investment opportunity.
PERTH
When the economy of a particular population concentration is reliant on just one or two industries, it’s inevitable the property market will be susceptible to the vagaries and influences of those industries. It doesn’t mean there won’t be growth at times, nor that people will be unable to make money from property, but it does mean that continuing high levels of security and flexibility will not be assured. Therefore, because the success of the west is very dependent on natural resources, the Perth property market is vulnerable. So Perth isn’t a market for the property investor to be in. And, yes, we are aware of the beauty of Subiaco, the special nature of Peppermint Grove, the success of Fremantle and the real improvements in East Perth, but if continuing security and flexibility is the only acceptable criteria for property investment (which it is!), then the west’s reliance on natural resources is a very real and worrying issue.
ADELAIDE
A few days in gorgeous Adelaide, with visits to the Barossa, McLaren Vale and the mountains, or simply enjoying the highlights of Glenelg, is definitely the way to revitalise the soul and the mind. Adelaide, without the traffic of the eastern seaboard capitals, is serenity itself, and North Adelaide and Unwin are beautiful places in which one can live extremely comfortably. However, in comparison to the really strong underlying supply-demand factors and population size of, say, Melbourne or Sydney, Adelaide, with its population of a mere 1.2 million people and relatively slow growth, is not the place for secure long term property investment.
And if you’re one of those who’s thinking of purchasing property or making any kind of investment for that matter, in the hope or expectation that South Australia will be having a resources boom to match that of the west, then we’d remind you that waiting for such a thing to happen makes such an “investment” no more than a speculation.
CANBERRA
Depending upon your particular view of politicians, Canberra can either be a bitter or sweet place to visit. With its libraries and museums and parliament house, you could loose a month with exploration and research, and still feel you had a year to go.
Some years ago I was presenting to an audience of accountants and financial planners, and was explaining that quality property investments will only be found in the best inner areas of a major metropolis. I then made the point that, from a property investment point of view, Canberra (including Queanbeyan) was most definitely not a major metropolis. Well, that put the room into heated discussion with some saying that Canberra’s future was assured because it is the ‘decision making capital of Australia,’ and so on. I explained that a population base could not be considered a major metropolis if that property market could be seriously impacted by one specific factor; and, in this instance, that factor is politics.
For example, if there was a change in government and the incoming government increased or decreased the public service by, say, 10 per cent, then there would be a radical change in the underlying supply and demand factors for property, in addition to effecting both capital and income levels.
With a population of around 350,000 people, and with that population so dependant on politics, it’s not a secure investment market and it will not be for a long while to come.
MELBOURNE
In the late 80’s and early 90’s Melbourne was an economic basket case. And, like him or not, Jeff Kennett almost single-handedly pulled the city out of the mire. Today, it’s a great and popular city, with a population size, growth, economic strength and breadth that renders its property market utterly secure. Right now – and it has been that way for many years now – medium-to-high density property in the best inner urban areas is under siege from tenants, owner occupiers and investors, and there is no sign of this demand abating. If you purchase the best property close to the city centre, your long term returns will be significant. Melbourne gets a big tick.
SYDNEY
As I’ve been saying for the past two years, Sydney is a must purchase when it comes to property. Why? Because, like Melbourne, it has been an economic basket case. The only difference is that it still is. And a political basket case as well! New South Wales has been struggling for a decade, and this has caused its property market to struggle also. Once Sydney property prices were 10 to 20 per cent ahead of Melbourne, but today that’s no longer the case, and I doubt we’ll ever see such a divergence again. Right now there are opportunities in Sydney to purchase excellent investment properties at lower prices than in Melbourne, and we believe this market is finally on the move.
For more information, or to arrange an appointment with a John Hopkins Property Adviser, please contact our Client Liaison Officer on 1300 726 082 or click here.