Investors are now searching the globe looking for the next property hotspot that will yield strong and sustainable returns over the mid to long term. Seasoned investors want to enter a marketplace just as the investment curve is at the bottom in the hope that the market will appreciate thereafter.
In my eyes, catching the bottom of any market is almost impossible and for that reason I always like to enter markets just as it starts to show signs of recovery, i.e., increases backed by strong economic activity.
The two markets in Australia which I’m going to focus on are two different propositions but offer strong investment cases underpinned by limited supply, consistent population increases and an ever-increasing demand for quality housing. The two markets are Brisbane and Melbourne.
Brisbane is the third largest capital city in Australia and, to me, the sleeping giant when it comes to Australian property markets. Brisbane was recently ranked the fastest growing “mature” city in the world, the population of which is predicted to double over the next 40 years to just under 8.5 million. To have a major city where its population is predicted to double is quite a phenomenal statistic on the bare form alone, and the main driver is employment.
There are some major infrastructure developments, both ongoing and predicted, that would result in job creation for both skilled and manual workers, highlighting the need for more quality housing.
Brisbane is also undergoing major redevelopments in key locations such as Fortitude Valley and Newstead. Both areas have high volumes of government and private spending with over A$134 billion committed to southeast Queensland alone by 2031.
Let’s look at Newstead — a thriving location for large corporates with a big audience of professionals looking to rent and buy quality apartments near to their workplace. Newstead is home to Bank of Queensland, Virgin Australia and Macquarie Bank to name a few. More large corporates are relocating there as they look for a better work life balance for staff as well as cheaper corporate rents.
With low unemployment levels and an ever-growing demand for quality housing, Newstead deserves serious consideration as a strong investment market. Australian banks also lend up to 80 per cent of the property value to foreign buyers and with favourable mortgage rates. All key investment drivers are pointing towards Newstead.
Developers are also only allowed to take 10 per cent from clients on off-plan projects which means you pay 10 per cent on legal exchange, then nothing until you get the keys to your property, which in some cases can be three years away. A nice market built on strong fundamentals, greater demand for properties than supply and a clear legal structure to freehold ownership.
Melbourne has shown steady increases in pricing over recent years and, in my opinion, this trend is set to continue. It has been ranked ‘The World’s Most Livable City’ for the past three years and is renowned as the business, educational and recreational hub for the whole of Australia. The projected population increase is greater than the amount of new homes planned to hit the market over the next 10 years — another great statistic to make investors feel comfortable about a steadily increasing property market for capital values.
Foreign investors sitting on non-local currency (i.e. no Aussie dollars) also need to pay huge attention to both the value and volatility of the currency into which they will be investing, i.e., the currency that you’re buying the property in. While everyone has their own opinions on the value of the Aussie dollar, I believe that the currency is starting to stabilise now and feel that it’s back to a level which is realistic for pound and dollar-based investors.
Melbourne is renowned for its universities and schools, boasting the highest number of university students in the whole of Australia with enrollment numbers increasing year-on year. Melbourne also has great connectivity through the city with an expansive tram network, fantastic train network and efficient bus networks, making most places within 10 kilometres of the central business district very commutable.
The Melbourne property market has been on the rise for some time showing consistency with its circa 5 per cent annual price increase over the last eight years. Markets which jump in double digits on an annual basis generally set themselves up for a big downturn as the price growth of double digits is not sustainable in the long-term.
Both Brisbane and Melbourne have their own, different, stories, but both have low vacancy rates on rental apartments and a lot of activity with domestic buyers which should give investors confidence when contemplating an investment.
— The writer is director and head of Middle East, IP Global.
