Sometimes the best clues about what will happen with property markets come from the things happening behind the scenes, often hidden from the view of the general public.
News media obsesses over the latest price data as the best way, indeed the only way, to chart what’s happening with property markets.
But, for everyday consumers, this is essentially useless information because it tells you what has happened recently – if you believe the dodgy data pumped out by the attention-seeking research companies.
What Australian consumers really want to know is what will happen with prices in the future.
What has happened in the past might be interesting, but the past often does not inform the future, which is what matters most to people.
So our focus at Hotspotting is examining and analysing forward looking indicators – sets of information which can provide a clue to the future.
We chart sales activity trends, we’re interested in what’s happening with vacancy rates and rents – and, most of all, we’re interested in what’s happening with the economies of the various locations across Australia, with infrastructure spending a big factor.
Real estate is fundamentally a local business. We don’t have an Australian property market. We have thousands of individual markets, all driven by local events.
What’s happening in the local economy is always the key factor.
So we’re interested in any information that informs our knowledge about what’s going on in the many economies around Australia. Because this will translate into impacts on real estate demand.
One regular report we always show interest in, is the States of the States report published quarterly by CommSec, which is an arm of the Commonwealth Bank.
This report analyses the eight state and territory economies according to eight key economic indicators, which include population growth, housing finance, economic growth, retail spending and dwelling commencements.
CommSec uses this information to rank the states and territories from 1 to 8.
Over the years, I’ve noticed a correlation between the results of the State of the States report and the strength or weakness of property markets in the states and their capital cities.
Sydney and NSW have had the weakest property market in the nation recently and it’s not coincidence that this has happened alongside the decline of the NSW economy in the national rankings.
Historically, NSW has typically ranked first or second in the nation with its economy, but the in past two years it has slipped down the rankings to be in the bottom half of the table.
Tasmania historically has been the weakest economy in Australia but in the past 3-4 years it has risen steadily up the CommSec rankings and, in the past 1-2 years, Tasmania has ranked No.1 or No.2 among the state and territory economies.
Happening alongside the Tasmania economic miracle has been a property boom in Hobart and Regional Tasmania – which predated the national boom which was so prominent in 2021.
So this week CommSec published the latest quarterly edition of its State of the States report and I was interested to see that the No.1 economy in Australia, now, is Queensland.
This is the first time Queensland has achieved the No.1 ranking in the 13 years CommSec has been publishing this report.
Queensland leads the nation on population growth and on employment data – and overall is ranked the strongest of the state and territory economies.
At the end of last year, I collaborated with the comparison website Canstar to produce the annual edition of the Rising Stars report, in which we rank the various property market jurisdictions around the nation on their prospects for growth.
We used various metrics to rank the capital cities and regional markets – and, using that methodology, we found that Brisbane and Regional Queensland were two of the four top markets for investment.
The CommSec ranking of Queensland as the strongest overall economy supports that view.
Another of our top four markets in the Rising Stars report was Adelaide – and, again, this also blends with the findings of CommSec’s State of the States report.
South Australia has traditionally sat towards the bottom of the economic rankings, but in the past year or two it has been steadily rising up the pecking order.
In this new edition of the State of the States report, South Australia ranks No.3 among the nation’s economies.
This reinforces our view that Adelaide is one of the best property markets for investment.
The other market that features highly in our recommendations is Perth – and it’s noticeable that Western Australia leads the nation on relative economic growth, according to his latest edition of the State of the States report.