Property Growth and Performance

By Michael Yardney
February 2008

With the world stock market meltdown and all the news about interest rates, affordability, recessions and depressions, it is not surprising that many investors are concerned or at least confused.

Yet 2007 saw the value of many well located properties grow at rates we have not seen for many, many years. The stand out growth performances of some inner suburbs in Melbourne, Brisbane and Adelaide in particular, were at property boom levels.

The latest figures from Residex www.residex.com.au show how strongly our markets performed last year:

Houses - Growth					Units - Growth
City	Median Value	Growth PA 1997-2007 %	Last year %	Dec 2007 qtr	Median value	Growth PA 1997-2007 %	Last year %	Dec 2007 qtr %
Canberra	$452,500	11.65	13.62	4.91	$351,000	11.42	11.38	5.01
Adelaide	$353,000	10.97	17.84	5.45	$268,000	11.32	19.58	6.42
Brisbane	$432,500	11.90	18.96	5.10	$323,500	9.61	15.19	5.41
Darwin	$398,500	9.63	13.71	3.07	$299,000	8.41	11.75	2.31
Hobart	$344,500	12.29	11.20	2.77	$237,500	11.14	3.06	-2.82
Melbourne	$480,000	11.13	23.54	9.24	$355,500	10.80	19.58	6.80
Perth	$502,000	14.09	2.15	-1.80	$382,500	12.46	3.05	-1.07
Sydney	$584,500	8.16	9.01	2.25	$400,000	6.95	6.04	2.75

But 2008 is going to be a very different year.

The stock market meltdown has meant that economic and market sentiment will be very different, however this should create some fantastic opportunities for property investors. Looking back I have always made some of my best property deals in times of uncertainty after market crashes.

Home owners and investors can take heart knowing our property markets will continue to perform well in the long term. But in the short term there may some hick-ups which will create opportunities.

You see… I do not think that we have seen the end of the fall out from the stock market crash. There will still be some aftershocks – there always are.

But despite the deepening pessimism following the melt down in the US sub - prime mortgage market, the general economic global outlook still remains positive and the fundamentals for property in Australia’s capital cities remains strong.

Having said that inflation is rising and our economical forecast remains strong which means that there is still the risk of a further interest rate rise or two.

The recent share market problems have once again shown how stable an investment property is. Recently the ANZ bank reported that in risk adjustment terms residential property has delivered vastly superior returns to all other asset classes.

The report said that in the past 23 years, at a national level house prices have virtually never fallen, with the greatest annual fall being 0.3% in the depths of the early 1990’s recession and then 0.9% in 1996. In contract share prices are volatile and fluctuate much more.

The fundamentals of supply and demand will hold up our property markets over the next few years. We are just not building enough houses despite having remarkable international migration. At the same time there is steady reduction in the number of people per household as our demographics change, again creating the increased demand.

While the fact that we are not building enough dwellings is bad news for both first home buyers and renters, it is great news for property investors or those who already own properties.

The next few years will see rentals rise dramatically as vacancy rates plummet further. It will also see that value of most properties in our maor capital increase in value considerably.

This article was written by Michael Yardney who is Director of Property Management at Metropole Property Investment Strategists www.metropole.com.au and co author of All You Need to Know About Buying and Selling Your Home.

This article appeared in Property Update – subscribe for free at www.PropertyUpdate.com.au

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Property Growth and Performance

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