Part Two: What’s happening with supply and demand across Australia?
Could an interstate investment be the right move for you? In the Australian property market, each state is different. Whether you’re a first time buyer, an investor, or a home owner looking for a change, buying interstate takes a little local knowledge. In Part Two of our two part review of Australian markets, we look at current state of supply and demand across the nation’s capitals and what it could mean for your plans.
In the first part of our ‘States of the nation’ review, we explored the range of factors that influence property markets across Australia. Every State is different as a range of factors – including but not limited to population growth, availability of employment and current interest rates –combine to deliver different impacts in different state capitals.
In the second part of our national roundup, we look at supply and demand and the effect it may have on your plans to move or invest interstate.
It’s all about supply and demand
While housing stock levels don’t tell the whole story, they do impact interstate rental and occupancy rates, and affordability.
If there’s not enough homes on the market to meet the demand, it figures that there will more competition for housing, pushing up both house prices and the costs of rental accommodation. That’s great news if you’re a home owner or investor, but not so great if you’re a first time or low income buyer, especially in the southern states where growth in Sydney, Melbourne and Canberra has far outstripped all other capitals as seen in Table 2.
Table 1 shows new and total listings across the capital cities in February 2017, with comparative changes on the previous 12 month period.
Southern states long on value, short on supply
Stock levels in Sydney, Melbourne and Canberra have felt the squeeze, which is reflected in the strong growth in value and the shorter average time on the market, confirming a continued high demand from investors.
High demand for fewer listings in Hobart
In Hobart, a significant drop in stock levels confirms this market as ripe for investment. While Australia’s highest rental yields may be attractive for investors, Australia’s lowest median house prices mean Hobart is affordable and in demand from first home buyers, too. As we saw in Part One of our review, moving interstate can be dependent on getting a job and Tasmania has shown negligible jobs growth in the last five years.
Mining for opportunity in Darwin and Perth
In the mining States, markets are still trying to find their equilibrium after the end of the mining boom. While the number of new listings was slightly down in Perth, along with their housing values, the capital of the west has plenty of stock available for buyers or investors willing to make the move across the country. And despite taking the wooden spoon for home values with negative growth of 5.3 per cent, Darwin residents are holding their properties tight, with just 178 new listings in February 2017, down 28.5 per cent on the same time in the previous year.
Sunny in Brisbane
In Queensland, Brisbane has delivered the highest year on year growth in rental listings. Despite only modest growth in values, reasonable rental prospects and comparatively more affordable median prices than Sydney and Melbourne, Brisbane is worth a look for first home buyers and investors alike as a warm, but not hot, market.
Steady demand in Adelaide
Rounding out our State-by-State snapshot, Adelaide has shown the least notable market variations over the past twelve months. While property values have grown only a modest 3.5%, listings are steady and rental returns are sound. Not surprisingly, this steady performer appears to be in high demand with a 48 day average time on market only bettered by Hobart at 47 days. By comparison, the much more limited housing stock available in Darwin sits on the market for an average of 113 days.
Investing interstate can be a great way to take advantage of better market conditions but before you book a flight here’s a few tips to consider:
1. Do your research – consult property experts, read property reports, and use property magazines and internet searches to read up on the area.
2. Be clear about why you’re buying. If it’s for capital growth, then it’s not worth buying in an area with an oversupply, but if you want positive gearing then good rental returns will be important.
3. Where possible visit the location before you commit to investing.
4. Look at property management options before you buy. It’s an extra cost that needs to be factored in but will give you peace of mind as a long-distance landlord
5. Understand the different laws and processes in each state that might affect your purchase. Stamp duty, for example, is a deductible expense in ACT but not in other states
If you’re in the market for an investment property, looking for a new life adventure, or simply looking for affordability in your next move, heading interstate could deliver a real financial advantage. Wherever you’re thinking about, talk to an Aussie broker today about getting the home loan that will work hardest for you. With your finances sorted, that’s one thing you can tick off the to-do list before you start packing.