By John Sage
People love a train wreck. To see the drama when something once trusted seems to go off the rails. The bigger they are, the harder they fall, after all! Even if the panic alarm has been wrongly activated. And guess what: this is exactly what has happened with the Australian property industry.
Here’s the deal:
It wasn’t that long ago that people would happily chat over a BBQ about wanting to get into property investment or discuss their existing investments. However, things have been turning sour lately.
Brisbane property investment has been caught up in a wave of doom-and-gloom media. Not only that, but the Royal Commission into the banking industry has dumped a bucket of icy water over many would-be investors.
So what level of worry is justified?
Maybe some. But most of the fears, particularly with regard to the Brisbane property market, are not justified. In fact, the opposite is true. It’s a great time to be a property investor in Brisbane.
Let’s step away from the investment-phobic, fake news headlines for a moment.
What’s actually happening?
Once we viewed property investment as the domain of the super-rich. According to the annual BRW Rich 200 list from 2016, over 40% of them identified property investing as major contributors to their wealth. More recently, real estate developers dominated the Australian Financial Review’s 2018 rich list, making up more than a quarter of Australia’s wealthiest people.
For example; China’s Wang Jianlin. The wealthiest real estate magnate in the world, with a net worth of $28.7 billion, Australia’s apartment tycoon Harry Triguboff, and yes, even Donald Trump, made their names as ultra-wealthy property players.
So what changed?
So-called ‘mum and dad’ investors started to buy investment properties to secure their futures. 83% of investment properties are now owned by small-scale investors. This smashes the idea that only millionaires can successfully invest in property.
Property investment is no longer exclusive.
Between 1985 and 2016, a wide range of people benefited from property development. Then in 2016, things changed again, but not in the way that you might think.
Australian Property Market: Historic Trends
The Australian housing market has always seen ups and downs. As this graph from Morgan Stanley shows, there have been six national price downturns of 5% or more in real, inflation-adjusted terms over the past 45 years, including two in the past decade.
So if this most recent slowing in house price growth is not a new phenomenon, why are so many feathers flying?
It could have something to do with the fact that we’re coming out of an extended period of strength, which made property investment particularly popular over the last decade, so current trends interest more people than ever before.
Also, our biggest and most expensive housing markets, Sydney and Melbourne, are being hit particularly hard right now.
This has gained significant coverage from national media, giving the impression that property markets everywhere are in trouble.
The worst part?
The banking royal commission is currently cracking down on bank lending, and the whole prospect of getting into the property market seems risky.
I can’t emphasize this enough:
These fears are doing Australian investors a great disservice. A few bad apples are poisoning the whole bucket.
Australia is not a lump, it’s not a single property market. There are numerous different dynamics happening nationwide, and there are often dynamics unique to a single suburb or even street.
Brisbane is not following the downward lead of Sydney or Melbourne. Instead, it’s bucking the trend of its southern cousins and is offering lucrative property investment opportunities and returns.
Instead of the headlines, let’s look at the facts.
Brisbane Property Market Drivers
People need places to live, and Brisbane has an exploding population and housing is in high demand.
In a lot of ways, it’s as simple as …
The migrant trickle from southern states has now turned into a flow, and population growth is accelerating in Queensland’s State capital. Where economists expected sharp declines in Brisbane to mirror the southern Capitol trends, these have not eventuated.
Instead, the climbing population means that apartment prices have risen for five straights months and are now higher than last year. This is in complete contrast to not only the realities of Sydney and Melbourne, but also opposes the negative media coverage that says the entire Australian property market is in trouble.
Australian Investor Confidence: Is the Australian Property Romance Dead?
The other myth that’s being spread is that investors themselves are bailing on the property market. The picture that’s being painted is one of disappointed and disillusioned investors, abandoning property en masse.
A recent survey of 820 property investors by the Property Investment Professionals of Australia (PIPA) shows that investor confidence is very high – higher than last year in fact.
More than 77% of respondents believe that now is a good time to invest in property, up from 70% in 2017. In addition, 52% are planning to buy an investment property in the next six to 12 months.
This is despite numerous and frequent leadership changes in government, the financial services royal commission, and the prospect of higher interest rates for investor loans. Most investors are unfazed!
Take for example higher interest rates. The survey showed that property investors did feel that it’s unwarranted to charge investors higher interest rates than owner occupiers (64%). However, in true resilient investor fashion, 61% said that they’re not discouraged from investing by higher interest rates and will comfortably meet them when their loans switch to principal and interest repayments.
In addition, property investors were not taken in by the doom and gloom surrounding the Sydney and Melbourne property markets. A whopping 90% said that the slowing markets of the southern capitals would not cause them to put their investment plans on hold.
The best part?
Notably, Brisbane’s popularity remains unrivalled and continues to grow. 44% of property investors consider Brisbane as the state capital with the best investment potential.
Brisbane is the hot favourite! It is climbing and climbing in popularity with investors in comparison to other big capital cities. It is more popular than Melbourne (down to 26% from 32% last year), Sydney (down to 8% from 9%), and Adelaide (down to 7% from 8%).
Whose opinions matter?
This is a survey of existing and aspiring property investors, who engage with industry publications and aren’t just armchair commentators without a stake in the game. Their opinions are the ones we should listen to.
So much of the knee-jerk emotional responses we hear are either from people who have no idea what they’re talking about, or from media outlets that want to provoke people with sensational headlines that aren’t based on fact.
It’s time to ditch hesitation and choose acceleration.
Property Market Fake News – What have we learned?
Ok, so far we’ve established that much of the drama around the Australian property market is misdirected.
We’ve also identified Brisbane as highly desirable by actual property investors.
You have witnessed the sorting of facts from fake news. If you take everything you read for granted, you would not understand the nuances that genuinely represent the state of the Australian property market.
The lesson learned? Make up your own mind based on facts.
How can you actually use this?
Prospective Investor: If you’re looking to invest in property, clearly Brisbane will be on your radar. As a Brisbane-based full-time property developer and investor, I’d be happy to meet and have a chat about anything to do with the local market.
Experienced property Investor: If you’re further along your property journey, I can show you some unique opportunities in Brisbane’s growth locations at various price points to suit you and your investment plans.
So, what do you think about the media coverage surrounding the Australian property market? Do you think they have it right?
Let me know what you think in the comments or connect with me on LinkedIn, Facebook, or Twitter. Of course, you can always contact me directly at email@example.com.