By CORE Property Advisory (CORE).
Property Market Update – Where to buy in 2016?
CORE maintains an active footprint across Sydney, Melbourne, Brisbane and Perth and applies its market research for the benefit of clients looking to build stronger, more diversified and higher-performing property portfolios. Jason Isherwood, Director, CORE, comments:
“After many years of lacklustre growth, the Sydney market grew as much as 50% in the past three years. The peak of the Sydney market was June 2015 with 90% auction clearance rates which have plummeted to 60% in only a few months. Sydney will likely experience near-zero growth over the next 2-3 years as it stabilises and returns to long term growth averages.
Recently, I have been asked the question, ‘Where are the remaining opportunities in the Sydney market?’…My answer is that the remaining opportunity in Sydney is to refinance the equity gains out of their Sydney properties and reinvest in other markets presenting as better value. Perth is still going backwards with the commodities cycle and Melbourne’s growth is forecast to follow Sydney’s recent slowdown. The clear market to be investing in 2016 is Brisbane.
Brisbane is forecast to achieve 5%+ per annum growth over short-medium term (next 3-5 years), significantly higher than any other capital cities from where we stand today. And that is the average….CORE has consistently achieved higher rates of capital growth for clients than the average. Brisbane not only has the highest forecast capital growth potential but is also the most affordable capital city with median prices nearly half that of Sydney.
The opportunity is compelling, particularly for Sydneysiders. We are purchasing freestanding houses on 400m2+ of land in quality suburbs less than 10kms from the CBD for as little as $550,000, or roughly the cost of a studio apartment in many top Sydney suburbs. Further, Brisbane has one council zone for the entire metro area and is very development-friendly which means that there are significant potential gains through future subdivision – on top of the forecast higher capital growth. Client portfolios also benefit from diversification, which is a sound principle in any investment asset class.
We are seeing many superfunds (SMSF’s) taking advantage of the opportunity to acquire houses at lower price points, and for those with slightly higher budgets we are achieving rental yields of up to 5.0%+. At the upper yield levels, these properties are covering their own costs (cashflow neutral to positive) which historically has been difficult to achieve with houses in blue chip locations. Sydney, by contrast, has typical house yields between 3 – 3.5%.”
In Sydney we are focussing on owner-occupier / home-buyer opportunities. As at November 2015 the market is currently in flux with the annual jump in spring listings coinciding with a sharp fall in clearance rates from 90% in June to 65% in November. This has created turbulence and confusion in the market as vendors have been caught off-guard with demand & pricing implications. This turbulence will only last a few months but is currently creating opportunities for our clients, and we are helping them access off-market properties through our agent relationships and purchasing properties for as much as 10% less than identical properties.
901/13-15 Bayswater Road, Potts Point – August 2015 – $4,250,000 ($300,000 discount to market). Secured for an owner-occupier, 3 bedroom + study, penthouse apartment, nearly 600sqm on title including a 300sqm rooftop terrace. The identical property next door sold 1 week earlier at auction for $4,550,000
10/78 Balgowlah Road Balgowlah – September 2015 – $720,000 ($80,000 discount to market)
Secured for an owner occupier, this top floor apartment, 2 bedrooms, 1 bathroom with lock-up garage. An identical property (unit 9 – right next door, comparable property – same floorplan, condition etc.), sold for $796,000 in July 2015.
In Brisbane the current growth wave has reached as high as the $700,000s. This means that while we can still purchase houses within 10kms of the city for as little as $550,000, the ‘sweet spot’ is above $750,000 – to the point where we are achieving 5.0%+ yields and we are purchasing some properties where the price has not moved for seven years. (This was the case in Sydney three years ago when we could purchase blue chip properties that had not moved in seven years – and then they eventually moved rapidly – as much as 50% – in the last three years to once again arrive at the long-term mean. There are fantastic opportunities in the Brisbane market currently. More and more interstate buyers are starting to make their way to Brisbane – so best to get in sooner than later. CORE have purchased 80+ Brisbane properties over the past year for Sydneysiders looking to access better value, growth and yield.
Development Potential, UNDER MARKET
51 Park Street, Coorparoo – June 2015 – $960,000 ($30,000+ discount to market value). Existing beautiful home in super-premium suburb close to Brisbane CBD sitting across two lots (titles) which can be subdivided in the future to build (2) new homes. Property secured within 3 days of hitting the market at land value only (effectively secured house for free). The agent was presented with a cash unconditional offer for $990,000 ($30,000 more than our offer) after accepting our contract.
42 Vakuta St, Figtree Pocket – November 2015 – Valued at $810,000+ and purchased for an SMSF for $780,000 ($30,000 discount to market value), this tidy house set on 1,000m2+ of land in a premium, high-capital growth Brisbane suburb only 8kms from the CBD will achieve a rental yield of 5.0%+.
76 Amelia St, Nundah – August 2015- $670,000 off-market purchase secured at a $75,000+ discount to market value. This property has a current development approval to retain the existing house and for 2 x small 3 bedroom townhouses at the rear. The property was originally listed at $749,000 with the price negotiated down to $670,000.
11a Elliott Street, Clayfield – October 2015- $550,000. Near new freestanding townhouse secured at $45,000 discount to market value. The identical property next door sold 3 months earlier for $595,000. Will achieve a rental yield of 5.0%+.
Request a free property consultation
CORE offer a free, no obligation, initial consultation to CA clients. So whether you are looking to gain an advantage in the local market for your next home purchase by accessing off-market opportunities – or looking interstate to build on your current portfolio (inside or outside of your SMSF), let us know and we will arrange for you to meet with a CORE property strategist. If nothing else, you’ll walk away with good market information and great tips for your property search – even if you decide to DIY in the end.
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