In this webinar Terry answers the following questions and more …
1.25 – Q: Is it possible to buy for around $350,000 for excellent capital growth and high yields?
6.14 – Q: What is happening in the northern suburbs of Adelaide?
11.04 – Q: Is it risky to buy sight unseen?
14.10 – Q: How is the Sutherland Shire performing?
17.42 – Q: Is all of the house price data we see actually up to date, or does it lag behind the market?
23.16 – Q: Why are house construction costs rising by so much and are the current costs the new normal?
26.24- Q: Will interest rate rises affect the Sydney property market?
33.15 – Q: Would you invest in Perth? And if so what suburbs?
38.31 – Q: Which is more important cashflow or capital growth?
And here are the answers –
Q: Is it possible to buy for around $350,000 for excellent capital growth and high yields?
A: There are still opportunities to do that but those properties are becoming harder to find given the growth that we’ve had in property markets in the past 18 months.
Latrobe Valley in Victoria is a great example of that including locations like Moe and Morwell – and also Traralgon, which is a little bit more expensive.
We’ve seen prices rising 20% to 30% but, because it is coming off a low base, many of the towns in the Latrobe Valley still have a median house price below $300,000 and the rental yields are still good and above 5% in some places.
The prospects for capital growth are good because the area has very much a dynamic economy with jobs being created. It’s close to Melbourne and offers an affordable lifestyle for people who can work remotely.
Other parts of the Victorian market with affordable price points include Shepparton where the median house price is about $370,000.
Merbein and Red Cliffs in Mildura also have very affordable prices and very good rental yields, while in the East Gippsland area, towns like Bairnsdale still have houses typically priced in the $300,000s with rental yields above 5%.
Regional South Australia also has some affordable options in places with good credentials for future price growth including Murray Bridge which has a median price well below $300,000 and yields typically above 5%.
Mount Gambier has a median house price around the $300,000 mark and Port Augusta is a “cheapie with prospects” where you’ll typically buy houses for below $200,000 and get rental yields above 8%.
It is a strategically located town that is being revitalised with renewable energy projects either under construction or proposed for the region. It is still perhaps a risky proposition, because of its links with the resources sector, but it does have prospects for future growth – as does Port Lincoln, which is another affordable SA regional centre with solid prospects.
Q: What is happening in the northern suburbs of Adelaide?
A: You can buy below $350,000 in many suburbs in the Local Government Areas of Playford and Salisbury and on the extreme northern fringe of the Adelaide metropolitan area in Gawler.
Gawler is a gateway to the famous Barossa Valley wine district which is becoming increasingly connected through urban sprawl to Adelaide and transport links have been improved.
All three areas offer affordable prices and very low vacancy rates. It’s hard to find a postcode anywhere in Adelaide that has a vacancy rate as high as 1%.
Northern Adelaide has many major employment zones. So, there’s a prospect of buying very affordably in areas with good infrastructure and good amenities which are close to where you might be working. Employment hubs include the Edinburgh Defence Base and big commercial industrial estates.
Areas like Andrews Farm, Craigmore, Elizabeth Vale and Munno Para all have median prices in the low to mid $300,000s and yields between 5% and 6%.
There are eight suburbs around the same area with Elizabeth in the name which tend to be down market where median house prices are in the $200,000s. While the area is a little stigmatised there is very good affordable buying with good amenities and good infrastructure, close to jobs.
The suburbs of Salisbury and Brahma Lodge have prices in the $300,000s with good rental yields and low vacancies.
Affordable markets within the far south of Adelaide in the Local Government Area of Onkaparinga include Christie Downs with a median of about $365,000 and Willaston in Gawler with a median about $360,000.
The Adelaide market is extremely hot, people have finally discovered that Adelaide has a lot to it, the economy is strong and there are really good growth prospects for its market.
Q: Is it risky to buy sight unseen?
A: It is risky, but you can buy real estate safely and prudently if you do the due diligence without actually having seen the property yourself.
I own real estate that I’ve never actually seen in the flesh but I’ve done it using a buyer’s agent. The key I think is that you have to find somebody you trust to look at the property for you. If you’re buying interstate as an investor and you can’t travel to visit the property yourself you should spend money on someone who is a well credentialed buyers’ agent to do that work for you.
The buyer’s agent, or someone qualified acting on their behalf, will inspect the property and report back to you.
And then, before you commit to buy, you need to have a more specialised building and pest inspection report carried out.
This report will reveal the things you probably need to be most aware of as a buyer because it can discover things that are hidden from plain sight and which you as a buyer you may not actually see yourself during an inspection.
Q: How is the Sutherland Shire performing?
A: The Sutherland Shire has been one of the leaders of price growth during the boom for a number of reasons. It offers relative affordability, in Sydney terms, compared with what you may pay in the Eastern Suburbs or the Inner West or in particular in the Northern Beaches of Sydney.
The apartment markets in this area offer buyers a lot because it is a great lifestyle area, close to the water and national parks, and the prices are much lower than some of the more upmarket areas closer to the CBD of Sydney.
There are very low vacancy rates, with most postcodes below 1%, and rents are strong.
Typical pricing for Cronulla houses is now above $3 million but mainstream suburbs in the Shire the medians that are between $1 million and $2 million, which means it is relatively affordable in Sydney terms.
The apartment market is much more attainable with a number of suburbs with median apartment prices in the $700,000s. Cronulla units are above $1million, but most suburbs are between $700,000 and $800,000.
Q: Is all of the house price data we see actually up to date, or does it lag behind the market?
A: The data does lag, so by the time most people receive it, it is out of date. When markets are moving as quickly as they have been in the past 18 months, then the data that’s being published today actually relates to sales that happened a couple of months ago.
It is already almost irrelevant when it is published because prices have moved so much in some locations – in some cases, by more than 10% in just one quarter.
Be mindful that data published in media from the various data companies needs to be taken with a grain of salt.
When you compare data from different firms, you soon realise just how rubbery the figures are because all the different sources use different methodologies – and have different results.
If you Google the median house price for any suburb in Australia, you are likely to results from seven or eight different data companies and they will all have different figures – with a range as wide as $150,000 from the lowest to the highest.
Q: Why are house construction costs rising by so much and are the current costs the new normal?
A: The cost of creating new house and land packages in Australia is ridiculously high, partly because about half the cost is made up of government taxes, fees, charges and levies from all three levels of government.
Real estate is used as a cash cow by all levels of government – but, added to that, are the additional pandemic factors with shortages of everything from bricks and timber to tradies. All the materials that go into building a house are in short supply and as a result prices are rapidly rising. It takes twice as long to build a house which is also adding to the cost pressure.
I would hope that once we deal with the supply shortages that will alleviate some of the pressure and costs will come down, but the building industry is saying current costs could remain.
Q: Will interest rate rises affect the Sydney property market?
A: In my view the recent interest rate rise will have little minimal effect on the property market. It’s not going to cause prices to collapse, contrary to what we are told by the mainstream media.
The forecast “collapse” in property prices won’t happen. It has never happened before (prices falling because of an interest rate rise) and if it did, it would be unprecedented.
The last time we had a period of rising interest rates in Australia was 2002 to 2008. During that period housing prices in Australia more than doubled in most capital cities.
Q: Would you invest in Perth? And if so what suburbs?
A: I think Perth is going to have a pretty good year this year. Probably it will be the best year for price growth in more than a decade since the last big resources investment boom, when Perth was leading the nation on house price growth.
Perth as a capital city has a property market that’s more volatile than most capital cities because its economy is so hooked into the resources sector, which in itself is volatile in nature.
Perth is now the most affordable capital city in Australia and buying is particularly good value for money. Vacancies are also very, very low.
If you talk to investors who trying to buy in Perth, buyer’s agents operating in Perth, selling agents and valuers, you’ll find that they’ll all tell you that the Perth market is extremely competitive. Prices are strong and properties are selling very quickly.
If you’re wanting to buy at the lower end of the market for affordability and pretty good rental returns, the cheapest part of the Perth market is Kwinana which has good credentials for growth.
Rockingham, I think is a great prospect and there are a lot of coastal seaside suburbs, where you can still buy houses in the $300,000s.
If you’re aiming for higher price brackets, maybe middle market, then you might target Joondalup in the north with lots of amenities including a university campus, hospital, transport interchange, office buildings and retail.
I also like Stirling, it’s been a very, very good performer even during the downturn.
Q: Which is more important cashflow or capital growth?
A: You don’t have to make a choice between the two. If you choose your location well, you can get a nice balance between both.
There are plenty of options for this around Australia.
Both Brisbane and Adelaide have precincts that provide high yields and potential for price growth.
Across regional Australia there are great options too, places that have got great prospects for future growth, like Toowoomba, Rockhampton and Bundaberg in Queensland.
There are also plenty of options in New South Wales- including Tamworth, Dubbo, Wagga, Wagga and the Hunter Valley. In regional Victoria there are locations with good prospects, including Bendigo and the Latrobe Valley.
