What is YOUR property market doing? What’s the market up to? Which market is that? The real point is that there is no one property market that every buyer and seller currently sits in. There are property markets all across Australia and New Zealand – in cities, in city suburbs, in country towns and in coastal locations, for example – all performing differently. Not only is each state or region at its own stage of its property cycle, but within each state or region different segments of the markets are behaving differently; and this extends beyond location to aspects like different property types. Housing is Australia’s single largest asset class, worth more than four times the value of Australian-listed stocks. In New Zealand, investment in houses represented around one third of all investor activity in a 12-month period. While we face low interest and inflation rates, numerous taxes and a stock market that is out of an individual’s control, real estate is more than an asset class; it is a longterm asset wealth growth vehicle too. Real estate may protect investment against inflation through the economic cycles and offer growth in response to increasing demand for property. Investment concentrations tend to be highest within the capital cities, and we are all very aware of Sydney, Melbourne and Auckland and the movements and maneuvers in those markets. Take those three out of the picture and look at investment
potential in other major cities, mining regions, coastal markets and other markets associated with tourism and lifestyle factors. Coastal and inland regions of all Australian states have the potential for rental return and capital gain. Cairns, Townsville, Mackay, Gladstone, Wagga Wagga, Dandenong and Mount Gambier are fair examples here. In New Zealand, the average national property price climbed 65 to 70 per cent over a decade, putting in a better performance than the share market. Almost half the value of New Zealand homes is inside Auckland city but as that market takes a breather, look to the opportunities to in regional New Zealand: in Wellington, Christchurch, Tauranga, Invercargill and others. A massive opportunity to buy may exist in any Australian state or New Zealand region, so don’t allow two or three markets to taint the scene. The law of supply and demand is a basic economic principle, and prominent in the housing market. When there is a high demand for properties in a particular city or state and a lack of supply of quality properties, the prices of houses tend to rise. When there is no demand for housing due to a weak economy and an oversupply of properties is available, the prices of houses tend to fall. This doesn’t just apply to Australia
and New Zealand, nor to only contemporary markets. For example, the US experienced an economic downturn from December 2007 until June 2009, during the ‘Great Recession’. The real estate market collapsed in 2007 caused by a decrease in demand for properties, which in turn created an oversupply of houses and saw prices decrease. In 2011-2012 Australia, it was rising interest rates that brought property markets in many centres to a grinding halt, though prices didn’t actually collapse. In all markets, those buyers who have a sound investment strategy and understand the fundamentals of economic and property cycles are most likely to end up in a financially sound position. One strategy is to buy well-located properties for capital growth, add value and then hold for the long term; but the key is having a strategy, have a plan and stick with it. Choosing the right location may mean drilling right down to the right property-type in the right street, which fits into your budgeted price range. Each one of us is moving through a phase of a property cycle that will afford opportunity for investors who know how to take advantage of it. What should make sense to a buyer, or seller, is to look to the performance of the market they are buying, or selling, in, and seek out the experts in that market. Education and knowledge will be critical to your success.
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