Happy New Year and welcome to our first blog for 2016. At this time last year I appeared on Sky News with an outlook for 2015 and I am happy (and a little relieved) to say we got it just about right. (you can view that video by clicking here).
At that time there was a lot of talk about the impending slowdown in the housing market which was driven by the 24 hour merry-go-round news cycle rather than having any basis on data or fact. That slow down didn’t happen and in fact 2015 was a strong year for housing in both Melbourne and Sydney growing by 11% and 10.5% respectively based on CoreLogic RP Data.
With the Australian Prudential Regulation Authority putting limits on investor lending followed by the major banks reaction to the ruling (including some blatant cash grabs in the form of raising interest rates on current investor and interest only loans) means that this year will certainly not have the same level of growth.
This factor, along with the normal cyclical nature of markets, will mean slower growth in the two major Australian cities. It seems as though we have reached somewhere near the peak in these two cities although there are likely to be locations that will perform well above the median in both Melbourne and Sydney
Canberra was the only other city which had any kind of decent growth in 2015, at 6% while Brisbane, Adelaide and Hobart all grew at under 2.8% and Darwin and Perth had negative growth. Brisbane is the only other market outside of Sydney and Melbourne which is likely to see sustained growth and certainly a market we are interested in for 2016. Again, the right property, within the right location is vital as there are some supply side issues in certain regions that need to be carefully avoided.
While the specific suburbs will change, the areas Nyko Property will be recommending will be similar to 2015. In Melbourne it will be town houses in the inner west and north and boutique apartments in the middle ring suburbs of the east and south-east. While in Brisbane it will be boutique apartment blocks and town houses within 15km of the CBD with great transport links and in areas of limited supply.
This is not based on the next ‘hot spot’, or which locations will grow the fastest in 2016. Our clients are investors not speculators, therefore the factors that interest us are the ones that will affect property in Australia over the next 5-10 years and which locations, and specific property types within those locations, will perform best.
Demographic data, population trends, cultural shifts in property ownership, large scale infrastructure projects, supply etc. are the real drivers of the property market. Cyclical changes up and down will occur, these are the dynamics of any market – however selecting locations with the highest likelihood of continuing strong demand for capital growth and rental will offer the best outcomes for investors.
At Nyko Property we put our money where our mouth is when it comes to performance. Each year we publishes our Annual Recommended Suburbs Report to see how the locations we recommended performed against the Australian and Melbourne property markets. In the 7 years to 2015 Nyko Property outperformed the Australian property market by 28% and the Melbourne property market by 33%. This year’s report is due to be published in late April.
Bill Niklouzakis – Director – Sales & Operations