Property Prices are Strong!
by John Hopkins, Executive Chairman
The last quarter has seen residential property prices throughout Australia increase substantially. As reported by the Australian Bureau of Statistics, median house prices increased by 4.2 per cent in the June quarter, on the back of an annual decrease of 1.4 per cent.
The percentage break down capital city by capital city is as follows – the first column is the quarter to June (Q on Q), the second is the year to June (Y on Y):
| State |
Q on Q % Increase |
Y on Y % Increase |
| Sydney |
4.9 |
-0.9 |
| Melbourne |
5.2 |
-1.5 |
| Brisbane |
2.5 |
-3.3 |
| Adelaide |
3.4 |
-1.9 |
| Perth |
2.7 |
-10.1 |
| Hobart |
2.5 |
0.6 |
| Darwin |
2.4 |
10.8 |
| Canberra |
3.6 |
-3.6 |
| Australia |
4.2 |
-1.4 |
The shock waves and fallout from the Global Financial Crisis, preceded by or, more correctly, created by the Sub Prime lending debacle in the United States, have negatively impacted on property markets throughout the country.
But the fundamentals in our major residential property markets have been both obvious and strong. And we’ve spoken about them with you before.
Those fundamentals are: population increases, substantial and chronic shortages of supply, low mortgage interest rates (considered low at the present five or six per cent, but even if they went up to, say, eight per cent), huge increases in development and replacement costs, plus an underlying confidence in the markets that’s reflected by everyone from lenders to property professionals, and from politicians to various economic analysts.
It’s obvious that the continued availability of the first home buyers grant has supported the lower price ranges across all of our markets. But the middle and upper residential price range has also seen gathering support. In Melbourne, for example, the upper end of the market over that same period has increased by a very impressive 14.3 per cent (as reported this week by the Real Estate Institute of Victoria).
Another factor to consider is that movement from one capital market to another always takes place just like clockwork. Presently, with concerns about various equity opportunities, there’s been a flight by investors away from the stock markets of the world to both cash and, to a lesser degree, property.
As an aside, I should say here that it’s probably time to take some of your investment capital and very carefully place it back into equities.
With the fundamentals as they are at present in the three major metropolises of Australia (Brisbane, Sydney and Melbourne), investors in residential property can rest assured that they’ll have, over the years to come, security, flexibility and appropriately high returns from the right categories of property.
Be wary though. Invest only in the property markets of those major metropolises. Hobart, Darwin, Canberra and Adelaide are beautiful places, but their population sizes and the fact that their fundamental economic stature is much smaller in comparison to those of Brisbane, Sydney and Melbourne, makes them speculations. They do not provide you with the all-important, essential security.
And Perth, while also beautiful, is simply too dependent on its natural resources. This makes its property markets insecure. Just look at the impact on all of its property markets since China sneezed because of the GFC.
So Brisbane, Sydney and Melbourne it is for long term quality residential investment property.
For more information, or to arrange an appointment with a John Hopkins Property or Finance Adviser, please contact our Client Liaison Officer on 1300 726 082 or click here.