Hotspotting

The Adelaide market continues to operate at unprecedented levels and right now is arguably the busiest and most competitive market in capital city Australia.

It presents an attractive proposition for investors:-
- It remains one of the most affordable cities in the nation,
- its prices are growing faster than any other capital city,
- it has the lowest vacancy rate, and
- its rental growth is leading the nation.

Our new edition of Top 5 Adelaide Hotspots reveals the markets within the Adelaide metropolitan area that I expect to excel for the rest of 2022 and into the future.

After 18 months of stellar price growth pretty much everywhere in Australia, affordability is more of an issue now than ever before.

And, as we head towards the Federal Election, it’s clear that the problem isn’t going to be solved any time soon, because none of the major parties have policies that will make the cost of housing cheaper.

There are policies that may make it easier for young buyers to get a loan to buy an expensive house or apartment, but nothing to address the high costs of creating dwellings in this country.

So this is an issue for all sorts of buyers, not just first-home buyers.

For the first time in a long time, there has been an improvement in residential vacancies in Australia.

But the change is miniscule.

The national vacancy rate, according to SQM Research, increased from 1% in March to 1.1% in April – which means that there continues to be a chronic shortage of residential rental properties around Australia.

What this means, of course, is that there is tremendous upward pressure on rents.

While a lot of media attention is focused on what is or isn’t happening with Sydney property prices, other parts of New South Wales continue to perform extremely well.
Late last year, along with the comparison website Canstar, I analysed the price growth prospects in all the major markets across Australia – the 8 capital cities and 6 state regional markets.I used a range of different metrics to determine the markets with the best prospects for price growth in 2022.

Of all those 14 market jurisdictions, Regional New South Wales come out on top as the No.1 ranked market in Australia. 
And that ranking really should not surprise.

Significant changes have occurred in the Sydney property market in the early part of 2022, with a weakening at the top end of the market and a re-focus on locations and dwelling types that offer better affordability.

Most notable is the shift in focus to more affordable suburbs for houses and also an uplift in demand for locations with apartments at attractive prices.

There is strong buyer demand in precincts where houses are typically available in the price range from $900,000 to $1.5 million, and suburbs with median unit prices below the overall Sydney median of $830,000 (CoreLogic figures) – or, in some cases, slightly above it.

We expect this to be an ongoing feature of the Sydney market, with more buyers opting for apartments to achieve purchases in good locations at more affordable prices – in a city where the median house price is close to $1.5 million and many suburbs have median house prices above $1 million.

Against this backdrop, we have published our new edition of the Top 5 Sydney Hotspots report. It outlines five precincts which we think have good prospects for future capital growth in both the house and apartment markets.

https://www.hotspotting.com.au/product/top-5-sydney/

Here’s an interesting fact: if history repeats itself, rising interest rates will mean that property prices also will rise, not fall.

In fact, if recent history does repeat, house prices will double during an extended period of multiple interest rate rises.

The Sydney market represents an opportunity for investors right now because the evidence suggests it’s less competitive than in 2021, so it’s becoming easier to buy well.

And vacancy rates are dropping fast and rents are rising, a situation that will be enhanced by the re-opening of international borders and the return of overseas migrants and students.

Let’s look at the background …

Sydney is the one capital city in Australia where there is some evidence that its property market has passed its peak.

Property prices seem to be hitting a plateau but it’s still too early to make a definitive call on whether its growth has stopped.

Sales activity appears to have tapered off in the early part of 2022 and CoreLogic figures suggest there was a small decline in the past two months in median prices for apartments and houses.

But there are many factors at play and it’s too soon to make a definitive call on where prices in Sydney might go for the remainder of 2022 and beyond.

The key message for Australians interested in what’s REALLY going on in property markets across the nation is this:

Don’t believe everything you read about how Australian property prices are faring at the moment.

In fact, I would go so far as to say: don’t believe ANYTHING you read about property prices across Australia.

You may have seen a lot of commentary about how prices are already on the way down across Australia – but, for the most part, that is simply NOT the case.

There’s a concerning trend emerging where people are relying TOO much on the monthly property price data - from one high-profile source - as an accurate indication of what is happening in property markets – and what WILL happen in property markets. Too many people take this short-term price data as the gospel truth and allow it to dictate their decisions on WHETHER they will buy real estate and WHERE they will buy it. Australian consumers need to understand this simple truth – all real estate data is, to some extent at least, dodgy data. They’re all rubbery figures and you cannot take them too literally. You certainly should not make big assumptions – or big decisions - based on one month’s figures from one source.

And you need to be aware that the emphasis featured in news media is quite different from what the actual figures show.

While there are some early signs that, maybe, Sydney and Melbourne markets are starting to moderate, all the evidence suggests that the opposite is happening in many other markets across Australia, including Perth.

The Perth market is undoubtedly the strongest it’s been since the end of that big resources investment boom almost 10 years ago.

After several years of downturn, the Perth market moved into recovery mode in 2020 and then became considerably stronger in 2021.

All the indications suggest that 2022 will be a boom year.