Property Report – June 2016

The future of markets around Australia.

by Terry Ryder.
creator of hotspotting.com.au

Introduction: The future of markets around Australia
Here’s the most important advice you may ever receive about real estate investment: it’s the future that matters, not the present or the recent past. That may sound simplistic but the reality is that most Australians invest according to the present while being influenced by the past. They don’t see the future because they lack the skills and their mindset is wrong.

When it comes to buying an investment property, the only thing that matters is the future. But that’s not how most investors behave. Most investors get into the market when media tells them there’s a boom under way. By the time media reports rising prices in a market, the rise has been under way for 12 months or more and it’s too late to buy well – much of the price growth that investors are seeking has already happened.

Investors miss many of the best opportunities because they are put off by a poor track record. Sydney had achieved little growth in the previous 10 years prior to its rise in 2013. Most buyers got into that market too late, after substantial price rises had already occurred. Many buyers shunned the suburbs of Blacktown because of a poor track record and perceptions of being a problem market, but from 2013 to 2015 they achieved the best growth in the Sydney area.

North of Sydney, many missed the spectacular rise in prices in the Gosford LGA because its track record over the previous 10 years had been extremely poor. There are many similar examples.

In each case, Hotspotting predicted the rise in prices, because we identified growth factors likely to drive an increase in values. To be successful with property investment, investors need to tune into the events and circumstances that dictate future patterns – and not allow the present and the past to discourage them.

For analysis of markets nationwide, click on the topics below …

National Overview Vision is needed to look beyond the present and see the future.
Adelaide & SA The 2 leading cities have better futures than many expect.
Brisbane & QLD Brisbane and the South-East will continue to grow strongly.
Canberra & ACT Planning changes to boost affordability and uplift the market.
Darwin & NT The NT capital is down, but it’s never down for long.
Hobart & TAS Tasmania is one of the best buys in the nation.
Melbourne & VIC An enduring future from population and infrastructure growth.
Perth & WA Now is a good time to be bargain-hunting in Perth and WA.
Sydney & NSW Look for regional opportunities, follow the Sydney infrastructure trail.
Conclusion Success belongs to those who leave the herd, run in the other direction.

 

National Overview
Vision is needed to look beyond the current conditions and see the future

The most common communication I receive from real estate consumers is this: I own real estate in (name of suburb or town) and the market has been going backwards. My partner thinks we should cut our losses and sell. What should we do?

It’s perhaps a natural reaction to feel a sense of foreboding when you’ve spent big on an investment and it appears to be performing poorly. Not matter how many times people are reminded that real estate is a long-term investment, there’s a tendency to panic during a downturn.

It’s important to understand that every market, not matter the location, goes through down periods. There is no suburb, town or city in Australia where the market always rises. Every market will go through a period of rising fortunes, then a period of consolidation when values stop rising or may decline, and eventually another phase of growth. All markets have peaks and troughs.

Those ups and downs are enhanced in markets with natural volatility, such as towns and regional centres strongly impacted by the resources sector. The greatest angst among property owners around Australia right now is coming from those who own property in mining towns and resources-related regional centres.

Gladstone in Queensland is a classic example: from 2010 to 2012 rents and prices rose sharply, as Hotspotting predicted (while warning investors that this was a volatile market with a history of booms and busts) and investors piled en masse into that market, seeking a windfall. Some investors bought multiple properties in this one risky location (always a mistake). This happened in anticipation of a boom inspired by the three huge LNG processing plants being built in the Central Queensland city.

But developers went overboard. They built far too many new dwellings, because they assumed all the gas industry workers would be renting local houses and apartments. But most of the workforce was accommodated in temporary workers camps and a major surplus of dwellings resulted.

We warned investors to stay out of the Gladstone market or, if they already owned there, sell before the downturn struck or prepare for a period of poor performance while taking a long-term view.

Vacancies rose, rents fell and property values followed. In the midst of an extraordinary economic boom, unprecedented in regional Australia, the Gladstone property market experienced a major downturn.

Now investors who own Gladstone dwellings are in a lather because they can’t see any light at the end of this dark investment tunnel. But Gladstone is a strong regional city with a massive future. Those with vision and patience will ultimately make money from owning real estate there. It’s difficult, however, to imagine that future when prices and rents are falling.

There are similar scenarios happening in Port Hedland and Karratha in Western Australia, some of the towns of the Hunter Valley in New South Wales, and the towns of the Surat Basin and the Bowen Basin in Queensland.

But it’s not just resources-related locations feeling the pain of downturn. Some of our major cities are going through difficult phases in their market cycles, notably Perth and Darwin.

Investors are shunning the Perth market because it has been declining – not dramatically, but rents and prices have fallen – for the past three years. The relatively few with long-term vision are behaving differently. They recognise that this is the ideal time to be researching investment in this market – when the market is down, prices are low and there is little competition in the market from other buyers.

You just need to believe Perth has a strong future. And of course it does. Western Australia has been one of the nation’s leading growth economies and Perth has often been a national leader on population growth. Its property market has a very good track record of long-term growth in values, better than most Australian cities.

But, like every market, it’s going through a down phase. Most investors will avoid Perth until they read in media that it’s booming again, by which time the best opportunities to buy well will have passed into history. The enlightened few will be looking for bargains while the market is down, getting into position for the next growth phase.

This is the essence of good investing: understanding the cycles of real estate, identifying the markets with future growth drivers and buying when those markets are down and prices are low.

 

Adelaide and South Australia
The two leading cities have better futures than many expect

The problem for this market is that it has an enduring image as one that lacks strong pistons driving prices. Adelaide and South Australia is never a leader on economic or real estate growth. But Adelaide has been a solid performer over time. It’s a capital city and it’s growing – just not as prolifically as other major cities.

It needs significant strong positive news to lift it to another level – and it appears to have got that with the announcement of the $50 billion deal to build submarines in Adelaide. This is just the boost the city’s economy needs – even if the actual work in some years away.

French company DCNS has won the contract but the 12 new submarines will be built in Adelaide, creating thousands of local jobs. PM Malcolm Turnbull announced the decision, saying: “Australian built, Australian jobs, Australian steel,” That hopefully means something good for Whyalla, where the Arrium steel business is struggling to stay afloat.

Industry Minister Christopher Pyne says all 12 Shortfin Barracuda subs will be constructed entirely in Adelaide. “This is definitely not a hybrid build, it is a local build,” he says. New infrastructure will be needed at Techport, the shipbuilding facility in the Adelaide suburb of Osborne, where the new subs will be built.

Meanwhile, Adelaide is a city spending relatively large sums on infrastructure – the single biggest driver of economic and real estate growth. In particular the State Government is spending a lot on the city’s road network and also the commuter rail system. As long as that continues, Adelaide will have growth in its real estate market.

Whyalla, SA’s largest regional centre, has been struggling, because it is strongly linked to the resources sector and the downturn there has weakened the city’s economy. Adding to its problems are the struggles of major employer Arrium.

Arrium, formerly OneSteel, is in voluntary administration. But Whyalla has been attracting plenty of positive announcements in the recent weeks. Oz Minerals is advancing its $975 million Carrapateena copper mine expansion and it wants to build its $150 million Concentrate Treatment Plant at Whyalla. The mine expansion will create 800 jobs and it’s hoped many of the workforce members will be sourced from Whyalla.

BHP Billiton continues to work on its alternative plan for development of the Olympic Dam resource and said in April it hoped to include Whyalla in the new project plans (put together after the previous $30 billion scheme was shelved because it was too expensive). And there is hope for Arrium in the news that 15,000 tonnes of its steel will be used for a $620 million road project, the Darlington Upgrade Project, in Adelaide.

The Federal Government has handed Arrium an $80 million contract to replace 1,200km of rail lines for federal agency ARTC. Arrium may also attract steel orders from the afore-mentioned plans to build submarines in Adelaide.

I’ve had lots of emails from troubled real estate owners in Whyalla. I’d suggest those who panic and sell in the wake of recent negative headlines might regret it later.

 

Brisbane and Queensland
Brisbane and South-East Queensland will continue to grow strongly

It’s difficult to imagine a time when there is no future for Queensland, especially Brisbane and the south-east corner of the state.

Things change – and Queensland is not currently a dominant state for population growth and economic performance. But it has been in the past and I suspect it will be again in the future. Its natural assets, its resources, its lifestyle and its climate will remain persistent attractions for businesses and residents.

Brisbane has had a solid property market over the past couple of years, without generating major price growth except in specific pockets. This relates to a lukewarm state economy, undermined by the weakness in the resources sector, and the relatively small activity in infrastructure spending.

This is likely to change, as there are significant projects in the offing, including further upgrades to the Ipswich Motorway, the $5 billion Cross River Rail project, $1.5 billion in expansion at the Amberley RAAF Base and major construction projects in the dwelling industry.

While the Gold Coast has issues with a looming surplus of high-rise units, it’s a growth centre for multiple reasons, including infrastructure spending, other construction projects and high population growth. An ongoing light rail project, a major private hospital, facilities for the Commonwealth Games and expansions to retail and tourism infrastructure are boosting the economy.

The latest ABS data shows the Gold Coast-Tweed region continues to add hugely to its population. The percentage growth rate is not as high as in the past (it’s now increasing from a much larger base, so spectacular growth numbers aren’t so easy), but it’s still a headline growth centre. Gold Coast-Tweed grew 53,500 over the five years to 2015, a rise of almost 10%. It’s the nation’s sixth largest city, with 625,000 residents, well ahead of Newcastle-Maitland and Canberra-Queanbeyan.

So why have Gold Coast prices done little in the past six years, amid all that population growth? Because developers oversupplied the market with high-rise units, yet again. Now the market is showing some growth, because the surplus has been soaked up and, more importantly, there’s a big infrastructure spend.

The Sunshine Coast is also a big growth centre: its growth rate over five years (9%) was almost as big as the Gold Coast’s and 25,000 has been added to its population. The Sunshine Coast is the nation’s 10th biggest city – larger than Wollongong and considerably larger than Hobart. Like the Gold Coast, the Sunshine Coast has become a growth property market because of significant spending on infrastructure and other construction projects.

Other centres where growth is likely to be a regular fixture include Toowoomba, Gladstone, Townsville and Cairns. Two of these regional cities are places where investors are likely to be turned off by recent negative sentiment – but strategic investors would keep them on the radar screen.

Gladstone has a boom-bust history because of its links to the resources sector. You need to keep that in mind when considering an investment there. It tends to have high peaks and deep troughs. Currently it’s in a deep trough because developers grossly oversupplied the market, over-reacting to the LNG boom and misunderstanding the impact of temporary accommodation camps.

But Gladstone ranks as Australia’s No.1 industrial city, a status that has been enhanced by those three massive LNG processing plants now reaching the completion of their construction phases.

Townsville provides another case study: the collapse of Clive Palmer’s nickel refinery business has generated some hysterical headlines about the demise of the city economy. One declared the city a future “ghost town”. Investors who own property there are in a panic as a result.

But right now the positive events happening in and around Townsville greatly outweigh the negatives – it’s just that media is less interested in reporting the good news.

Here’s a reality check: Townsville is a very resilient place. It has one of the most diverse economies in regional Australia, with strong elements of government administration, education, tourism, the military, the resources sector and manufacturing.

And lots of positive news has emerged more recently. The economic and defence deal between Australia and Singapore is one example – it means $2.25 billion in new infrastructure will be built in Queensland, including in Townsville, which has a big military presence through its RAAF and Army bases.

 

Canberra and the ACT
Planning changes to boost affordability and uplift the city’s market

Canberra suffered from downsizing of the public service but those impacts have worked through the system and there are solid indicators of a return to growth.

Probably the biggest single recent event for the ACT is the change to planning provisions. An enduring problem for Canberra has been the way the ACT Government has controlled land supply, drip-feeding new residential allotments to the market in a way guaranteed to keep supply well below demand and therefore prices high. This increases government revenue, with small allotments selling for very high prices, but its does nothing for housing affordability.

A recent auction of blocks in Throsby resulted in the buyers paying, on average, $108,000 above the reserve prices. One 540m2 block sold for $536,500. Nine blocks of just 315m2 each sold for between $340,000 and $356,000. The Canberra Times reported: “The Government’s method of releasing small parcels of around 100 blocks has been strongly criticised by advocates of affordable housing who say it artificially inflates prices.”

The Federal Government is now pushing big changes to planning for the ACT. They will allow residential development in Tuggeranong, west of the Murrumbidgee River, while the parliamentary triangle’s East and West Blocks will be opened up for use as hotels, offices, restaurants, cafes or retail spaces, while outdated Federal office buildings at Anzac Park East and West will be redeveloped. The first major review of the National Capital Plan will also allow the CSIRO to sell its 701-hectare Ginninderra field station, to be zoned urban.

Changes to the plan give the ACT Government more control over planning while the National Capital Authority will maintain control over areas of “national character” including the parliamentary triangle and major roads into Canberra. ACT Liberal senator Zed Seselja says the changes will give the ACT the chance to “do the right thing for Tuggeranong” and to improve housing affordability.

Territories Minister Paul Fletcher describes the “Amendment 86” changes as the most significant and comprehensive redrafting of the plan in ACT history, which would provide a clearer and simpler planning framework for the nation’s capital. Senator Seselja said the changes were a big win for Canberra, particularly for housing affordability and local town centres.

“The current lack of both housing and facilities in Canberra’s outer suburbs is making it hard and unappealing for young Canberrans to enter the property market, particularly in Tuggeranong,” he says.

“The updated plan will ensure the viability of Tuggeranong’s future growth and will not only provide for more affordable housing opportunities but also new and upgraded facilities for local residents.”

This happens at a time when Canberra’s property market is showing solid signs of emerging from a period of stagnation.

 

Darwin and the Northern Territory
The NT capital is down, but it’s never down for long

Darwin is a prime example of a market that few will consider because it’s in a down phase.

But the history of the Darwin property market is one of high rents, strong yields and good capital growth. Before the resources boom ran out of puff, Darwin was a national leader on growth in prices and rentals.

Darwin has an almost unique dynamic because it’s essentially a regional centre which doubles as a capital city.

It has big links to the resources sector (which creates volatility) and the military, and is usually strong in tourism and construction.

CommSec’s State of the States quarterly report continues to rank the Northern Territory highly – fourth in the latest report, ahead of Queensland and Western Australia.

In 2011 and 2012, Darwin was a national market growth leader, alongside Perth. Both those cities had been pumped up by the resources boom. They both declined when the mining boom run out of puff. Darwin rents and prices have fallen since, with double-digit decreases in median rents in the past year.

But Darwin is nearing the bottom of the market for houses and units, according to valuer Herron Todd White. It says prices are down and suggests the buying is attractive at current levels, with evidence that the market is “stabilizing”.

In a recent report HTW split the Darwin market into key areas and commented on the “fringe” suburbs in each. It said inner-city fringe suburbs like Stuart Park, Ludmilla and The Narrows were generally targeted by those who can’t afford the pricier CBD, Larrakeyah, Parap or Fannie Bay options.

“There has been little to no activity on sales for houses in these suburbs, with Stuart Park having only four house sales in the quarter,” HTW says. “This is reflective of the Darwin market which is struggling, with overall vacancy rates up to 8.2%.”

It says the volume of unit sales in the inner-city fringe suburbs has fared better, with sales in Stuart Park rising 42% but with a median price drop of 10%. “This can be attributed to new developments being released to the market and investors jumping on a bargain,” it says.

HTW notes that since the end of the first-home buyer’s grant for existing dwellings, new units have become attractive while demand (and prices) for existing units has dropped. “The market downturn has opened up the potential for good buying in the area,” it says.

And that, in a nutshell, is my message. With the market down and pricing at attractive levels, now is a great time to be looking in Darwin, to buy well in expectation of the next upturn.

 

Hobart and Tasmania
It’s hard to convince anyone, but Tasmania is one of the best buys in the nation

Hobart is great example of the underlying theme of this report: if you’re stuck in the events of the past, you’ll never consider it for investment. But anyone with the vision to see the changes under way will take a different view.
The problem for a long time has been the underlying economy. Tasmania has been the perennial weakest performer among the states and territories. It has been last on population growth and an enduring reputation as the “basket case” among the state and territory economies.

Many people still believe this is the case. But much has changed.

Part of Tasmania’s problem in the recent past was a minority government. Now it has a much stronger and more proactive one. Part of the problem was a lack of economic growth. That has changed too. The Tasmanian economy is now performing well. Tourism is strong, helped by the low Australian dollar. Other sectors, including construction and agriculture, are rising.

On some parameters, Tasmania is now leading the nation. After years of recording Tasmania as last or second last on every economic indicator, it’s good to report positive changes.

And the property markets of Tasmania are responding to those positive changes.

In some ways, it feels like 2003. Back then, there was a major national property boom. Cities like Melbourne had had three years of massive price growth (much larger than we’ve seen recently in that city). Eventually the boom rippled across Bass Strait to Tasmania. Mainland investors noticed the cheap prices and the high rental yields – and Tasmania had two years of strong price growth.

Similar conditions exist now. Melbourne has had 2-3 years of strong market activity and solid price growth. As that cycle peaks, investors are looking elsewhere. Hobart is attractive because (1) it has the lowest dwelling prices in capital city Australia; (2) it has the lowest vacancy rate among the capital cities; and (3) it has the highest rental yields among the capital cities.

The median dwelling price for Sydney is $780,000 and Melbourne is $585,000. In Hobart, it’s $330,000. The median rental yield for houses in Hobart is 5.6% – the next best is Brisbane’s 4.8%, while both Melbourne and Sydney are below 3%.

In those terms, Hobart starts to look attractive.

Elsewhere in Tasmania, investors should also consider Launceston and Devonport in the northern part of the state, where affordable prices and high rental yields are now being underpinned by strengthening local economies.

Here’s another way in which thinking to the future makes Hobart and Launceston relevant. Imagine what will happen if Labor wins the Federal Election and implements its policy to scrap negative gearing. Where will investors buy?

I would suggest they will reject expensive markets with low rental yields, like Sydney and Melbourne, and focus on cities with cheaper prices and rental returns sufficient to provide positive cashflow – cities like Hobart and Launceston.

 

Melbourne and Victoria
An enduring future from population growth and infrastructure spending

Melbourne has had a good run over the past 2-3 years. Overall, I wouldn’t characterise it as a boom, because the annual price growth rate has been mostly in single digits. Individual markets sectors have excelled, but across the metropolitan area it’s been an active market with good price growth, but not a boom (2002 and 2003 was a boom in Melbourne when prices rose ???INSERT FIGURES)

Now the Melbourne has peaked – or is close to its peak, depending on how you measure it. In terms of sales volumes, Melbourne peaked around the middle of 2015. In terms of the annual price growth rate, it appears to be peaking now.

One piece of evidence suggesting that Melbourne’s run is close to being over is that the greatest momentum is now being seen in the outer ring suburbs. As is often the case, Melbourne’s run started in the inner-city suburbs, rippled out to the Middle Ring areas (which excelled in 2015) and now is being felt in the outlying suburbs of the north (Epping), south-east (Cranbourne), west (Sunshine) and south-west (Wyndham Vale/Werribee).

So where now for Melbourne? Three key factors stand out, two positive and one negative.

The first positive is Melbourne’s status as the national king of population growth. Largely through the influx of overseas migrants (but also boosted by interstate migration) Melbourne adds more to its population each year than any other city. Sydney is a bigger city, but Melbourne is adding greater numbers. This is a fundamental influence on the property market. The migrant influx has recently been an influence on price rises in the Middle Market in particular.

The second positive is the prospect of major infrastructure spending. Nothing pumps up economies and property markets like big spending on infrastructure. This has been the biggest factor underpinning Sydney’s recent boom. Melbourne’s up-cycle has been less prolific than Sydney’s because it has not matched it for spending on roads, rail and hospitals.

That may be changing. A number of big ticket infrastructure items are in the pipeline, boosted by commitments in the May 2016 State Budget. Examples include funding for the $11 billion Melbourne Metro Project and upgrades to other rail links.

The serious negative is the overbuilding in the inner-city apartment market. Even if developers decide to build no more unit towers, the product recently completed and under construction is sufficient to guarantee a big surplus leading to rising vacancies and falling rentals, with a consequent impact on property values.

The State Government’s decision to slug foreign investors with additional taxes makes the situation worse. Many of the current projects are being built primarily for sales to Asian investors. If the federal and state government crackdowns on foreign buyers deters them from investing in Australia,  Melbourne’s high-rise market will suffer considerably.

As has happened in New South Wales, the capital city’s boom has produced a ripple effect for regional markets. In Victoria, Geelong has had a busy market and there has been significant price growth in the towns of the Macedon Ranges, where in some cases median house prices have risen 20% or more in the past 12 months. And, yes, Hotspotting did predict those rises.

Other regional centres have been solid, without yet producing big growth. But cities like Bendigo, Ballarat, Warrnambool and Sale have strong futures.

 

Perth and Western Australia
Now is a good time to be bargain-hunting in Perth and WA

Perth is probably the best example among the major cities of the importance of looking beyond the present and seeing the future.

Right now property buyers are shunning Perth because the market is down and prices and rents are in reverse. The herd mentality dictates that now is the time to avoid Perth – and the time to return will be heralded by newspaper reports declaring that the market is booming again.

The relatively few who invest wisely will regard the current situation in Perth as a good reason to be house-hunting there.

Perth peaked early in 2013. It is now more than three years into a down phase. Prices have decreased, although only moderately. Most statistics suggest an average decline of 4-5% in the past year. Vacancies are up across the metropolitan areas and rents have consequently fallen.

There is plenty of property for sale, but few buyers. It’s a great time to be looking to find good property at cheap prices, without competition from other buyers.

You just have to believe that Perth and Western Australia have a future. And, of course, they do. WA is traditionally one of the strongest of the state and territory economies. Indeed, it’s often a national leader on various economic indicators, including population growth.

It’s currently in a slump because the resources boom died – but it will rise again. When it does, real estate will recover.

Based on what I’m reading, many analysts and commentators think the Perth market will hit bottom some time in 2017. I would suggest late 2016 or early 2017. So now is a good time to be looking -= researching the market without the pressure of having to act quickly, which are the best conditions for investors.

Outside of Perth, the regional centres south the capital city are the ones with the best prospects. They include lifestyle markets like Mandurah, Busselton and Margaret River. Bunbury, more of an industrial city, also has a solid future.

The centres to the north will take longer to recover. They’re mostly resources-related centres where prices went way too high in the resources boom, with Port Hedland’s median house price reaching $1.2 million and both Karratha and Newman reaching around $800,000.

Those pricing levels were unsustainable and, in the wake of the mining downturn, the reduction in rents and prices has been quite startling, though also predictable.

It will be a long time before prices return to these levels in the northern regions of Western Australia.

 

Sydney and New South Wales
Look for regional opportunities and follow the infrastructure trail in Sydney

If you didn’t buy in Sydney in 2013 or 2014, you well and truly missed the boat. The party is over, not because anything changed in the underlying economy, but because prices got to levels where they could not realistically grow any more.
This is why up-cycles generally run out of puff after three years. Price growth at those levels becomes unsustainable after three years.

So where does the market go from here? I would suggest there will be a similar outcome to the post-boom period in the early part of this century. Sydney’s median house price grew strongly in 2001, 2002 and 2003, including 22% in 2002 and a further 16% in 2003. Then the boom came to an end. In 2004 the median house price was unchanged and in 2005 it dropped marginally, around 2-3%.

I expect a similar reaction this time. It’s clear that Sydney reached its price peak in the middle of 2015, when the annual growth rate in the median house price was 15% to 17%, depending on whose figures you believe. The annual growth rate has been dropping, month by month, ever since.

But Sydney is a big city and there are local situations which will create above-average outcomes.

In particular, the development of new infrastructure will create sub-market situations investors should track. Transport infrastructure is the key item and a map of Sydney with all the current and planned projects is a mind-boggling thing to see.

A lot of it is focused on western regions of the metropolitan area. Central to planning for future growth in Sydney is the North West Growth Zone and the South West Growth Zone. These are the places where much of the new population growth is expected to occur and major road, rail, education and medical facilities are under way or in planning.

Some of it relates to the new Badgerys Creek Airport but most of does not. I could write a book on the projections and plans for areas like Rouse Hill in the far north-west, Penrith in the far west, Blacktown in the not so far west, Westmead in the mid-west, Liverpool in the mid south-west, and Campbelltown and Camden in the far south-west.

Most of these places are, by Sydney standards, at the affordable end of the dwelling market and are destined by big changes through the creation of jobs nodes and the development of major new infrastructure.

There is, of course, a lot more to NSW than Sydney. The state abounds with strong, vibrant regional cities and a switched-on investor would be seeking one with the following qualities: a major centre with a growing population; servicing a wider region with retail, commercial, medical, educational and other services; a strong and diverse economy; spending in new infrastructure; affordable prices with houses in the $200,000s or $300,000s; and yields around 6% to 6.5% easily attainable.

Locations which answer those criteria include Wagga Wagga, Dubbo, Goulburn, Gunnedah, Orange and Tamworth. Newcastle, Port Macquarie and Wollongong fulfill many of the stated parameters, but prices tend to be higher.

 

Conclusion:
Success belongs to those who leave the herd and run in the opposite direction

Here’s the hardest task I face when communicating with real estate consumers: it’s convincing them that a location which happens to have a poor track record, or a bad image, really does have a bright future.

People would rather buy in an area with a big growth record, but past its peak, than in an area with a poor recent record but a great future.

Partly it’s the herd mentality (do what the masses are doing because it must be right) and partly it’s the need to see tangible evidence that growth is occurring before committing hard dollars. Sadly, by the time that evidence emerges, it’s too late to buy at the best prices.

Decisions by property investors should always be dictated by the future, not the past or the present.

One of the key distinguishing behaviours of successful investors – in any field, including real estate – is that they buy counter-cyclically. Legendary US investor Warren Buffett, one of the wealthiest people on the planet, always preaches buying when others are selling and selling when others are buying. The simple philosophy has been the cornerstone of his success.

And it’s a philosophy all Australian investors should apart to the business of buying residential real estate.

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