2016 is shaping up to be a year in which opportune investors reap the rewards, as the Australian property market starts to transition from the recent strength in our two largest cities. Examining each of the capital city markets on a broad scale, the past 12 months have delivered substantially mixed results. Much of the focus in 2015 has been on Sydney and Melbourne, where median dwelling prices have spiked while most of the other capital cities have remained fairly subdued, overall. Looking forward, though, such significant across-the-board growth is unlikely for the year ahead. Indeed, interest in Australia’s two largest capital cities has begun to wane as investors start to move away from these overheated locations and look to the next two largest cities – Brisbane and Perth. While moderate gains are expected in many property markets across Australia, growth won’t be to the same extent as what we’ve seen in Sydney and Melbourne in recent times. However, that’s not to say high-performing properties cannot be found during slower markets. Even in a rising market, there are always bad properties that can be detrimental to an investor’s wealth and vice versa. Instead of seeing one capital city as a single market, investors need to understand that there are multiple markets within one city. Prices in some of these markets will fall, some markets will rise and others will stagnate. Hence the importance that property selection plays when seeking to generate wealth through property investment. To find the best-performing properties, investors need to complete adequate research and focus on established areas slated for new infrastructure, urban renewal, rezoning and favourable demographic changes. Such areas, which also hold strong economic fundamentals, will prove to be among the top performers in 2016, and can deliver great returns for investors. The benefits can also be two-fold for those investors that take advantage and choose to build their property portfolios as consolidation occurs in the major capital city markets in the year ahead. Firstly, investors in these markets will typically experience less competition (as buyers wait for the market to rebound), more choice (as housing stock increases) and more negotiation power (as the scales are tilted in the buyers’ favour). Secondly, investors can also gain full exposure to price rises during the next upswing in the property market.
Damian Collins Monday, 11th Jan 2016