With reports of Sydney house prices recording the nation’s largest annual fall of 6.5 per cent, many Sydney-siders are wondering whether it’s an ideal time to invest in property. inSynergy’s Richard Sheppard weighs in on the debate.
Some media commentary focuses on what they call ‘THE property market’. We might be told that the Australian property market is ‘overheated’, or that the ‘bubble has burst’, but in reality, there is not one Australian property market. Instead there are many property markets all at different stages of their growth cycle.
Property investing is all about timing. As one market wanes, another emerges as an ideal target. With values across the majority of Sydney dwindling, market analysts are weighing up the numbers and the consensus points to one major city being a standout option.
Affordability is key
Median property values in Sydney are nearly double those in Brisbane. The last time this happened was in 2003, leading to a scenario where Sydney peaked and plateaued in the following six years with only 15 per cent total growth, while Brisbane entered a period of strong property growth of close to 80 per cent.
So, by investing in $1,000,000 of property in 2003, you would have been $650,000 better off in Brisbane in 2009. Adding to this, the net rental return is around 50 to 70 per cent higher in Brisbane, so the rent and tax benefits usually covers all the costs such as interest, rates and maintenance. Compare this to Sydney, where low yields mean the net rent leaves you with a high cost to hold the property.
Multiple major research firms state that Brisbane can expect good to very strong property growth over the next five to eight years. Factors include a combination of affordability and a large price gap between other capital cities, strong interstate and overseas migration, solid jobs, economic and wages growth forecasts, all combining with a large reduction in apartment supply.
While there have been concerns about the impact of the Sydney and Melbourne slowdown on Brisbane, the market has already factored this into the economy, just as it had in the 2011 floods. After a long period of sluggish growth, the pieces of the jigsaw are falling into place for Brisbane. The fundamentals are great, yields are strong, and affordability is very high.
Important Note and Warning: This information is general in nature and should not be considered personal tax advice. We highly recommend you discuss these concepts with your accountant, property investment adviser and investment finance mortgage broker jointly to ensure any considered concepts are suitable for your personal financial situation, as one effect of the concept may negatively impact another part of your plan.