Investing in 2020: a property market update

Warren Buffett’s quote offers insight towards investing in 2020, with regard to opportunities. DPN’s Managing Director, Sam Khalil, along with Marketing Leader, David Bruce, bring you up to speed with today’s property market.

What’s happening today

With drought, fires and COVID-19, we’re certainly living in unprecedented times. However, the response from the government and banks is ensuring continued opportunities for investors. The RBA offers support on keeping interest rates low, and current dwelling value prices might surprise you.

Change in dwelling values

Overall, Australia is seeing mixed results in dwelling values. Some areas are increasing, others are decreasing and some are flat. If you look at the quarter ending 31 July 2020 the drop is 2.1%. However, over 12 months to July, we’ve actually experienced growth. Therefore, this is a fairly mild correction, compared to the peak seen in Sydney and Melbourne in 2017.

Though we can’t predict what will happen in the next few months with COVID-19, it’s almost certain that the government will continue to stimulate the economy to get people through the health pandemic.

NSW residential housing snapshot

As a result of the government stimulus, specific areas are still doing very well. The total value of new home loans has had a 16% increase and the value of new houses sold is up 21%. This doesn’t show a drop off in demand, but a significant increase.

What really dropped off isn’t house prices, but the supply of houses due to owners taking them off the market. This undersupply has kept prices fairly firm. Some houses have been sold at a massive discount to the market, as owners suffered financially. However, it’s important to remember that this isn’t indicative of the whole property market.

There has been a 66% drop in apartment approvals. Furthermore, there’s a significant downtown in immigration. This has resulted in an oversupply of apartments, which is affecting rentals and values particularly in city centres. Eventually, this should hit equilibrium with a potential vaccine and a return to immigration.

Change in rental performance

Contrary to popular belief, it’s apartments near or within CBD areas that are most vulnerable to changes in rental performance. For example, listings have increased by about 50% in Sydney and Melbourne. This is due to a number of factors including little to no immigration or holiday letting, as well as city workers being knocked out of the market.

Therefore, we’re seeing an oversupply of CBD apartments and median rental rates are dropping. On the flip side, the rental performance for suburban apartments has been much more resilient. The owner-occupier mix is much higher and, therefore, demand isn’t generally affected by worldwide events.

Influences leading into 2021

While there’ll always be a need for offices in the workplace, remote work is significantly on the rise on the back of COVID-19. The result is a move towards regional living, as people blend work, housing affordability and lifestyle options.

Government incentives will continue to stimulate demand, including the Home Builder Grant and the First Home Buyer stamp duty exemption. Interest rates are set to remain at generational lows for the medium term.

What’s the property market doing right now?

The most important thing to remember is that Australia is not just one property market, it’s many. With at least 8,800 suburbs in the country, it’s best to get specific. Based on new research by Residex, these six key regions are experiencing significant growth.

Shellharbour, NSW

With an idyllic coastal location and significant infrastructure investment, the population of Shellharbour is predicted to grow 34.6% to 2041. The lifestyle region also offers affordability, with a median house price point at $616,000.

Goulburn, NSW

It’s all about location in Goulburn, which is an attractive regional hub just an hour from Canberra. The region is on the proposed Canberra-Sydney fast rail corridor. With a median house price under $500,000 and excellent rental yield performance, Goulburn offers affordable lifestyle options for young families.

Logan, QLD

Logan is expected to be one of the fastest-growing cities in Queensland, with a $19 billion infrastructure pipeline. It's just a 30-minute drive from Brisbane and huge population growth of 81% is predicted to 2036, along with 10% capital growth in the next five years.

Thirlmere, NSW

Part of the booming Macarthur region, Thirlmere resides in the new growth corridor to western Sydney. Feeding the growth is the Western Sydney Aerotropolis and nearby Wilton New Town, with the creation of the 5th largest retail and commercial centre in NSW. Up to 40,000 new jobs are projected, along with 85% population growth to 2041.

Maitland, NSW

A regional city on the move, Maitland boasts the largest regional economy in NSW and enviable lifestyle options. With the new $470 million Maitland Hospital, the redevelopment of the Green Hills shopping centre and government-funded upgrades for roads, it’s expected that 62,000 jobs will be created by 2036.

Wollongong, NSW

The beautiful coastal city of Wollongong is an accessible alternative to Sydney. Planned infrastructure includes a $500 million investment into a new wellbeing precinct at the University of Wollongong and the development of West Dapto. The population of more than 300,000 is tipped to rise by 16.5% in the next 20 years.

The DPN Approach

Getting a strategy before you invest is the key to success when investing in 2020 and beyond. Our research and advice enables you to make informed decisions and establish the right finance structures from the start.

Walt Disney provides further wisdom for getting through challenging times, taking advantage of opportunities and moving forward towards building wealth.