The best places to invest in 2015
If you are a property investor investing within, or even outside of, your super, you would know that our ever-robust property market seems to be still motoring along with no sign of slowing any time soon. Sydney, the largest of all real estate markets, appears unstoppable, and while we have yet to see such stunning growth figures reported in other capital cities or large regional centres, most have at least delivered respectable performances.
It’s interesting how short our memories are. It was not so long ago that property owners all over NSW bemoaned the state of the market, laying the blame firmly at the Government’s feet for a raft of anti-growth initiates, such as the vendor transfer duty introduced in June 2004 and quickly repealed in August 2005. Property in NSW sat fairly stagnant for such a long time, and the 10-year growth figures this year show a modest 3.6% per annum growth over the past decade, according to CBA chief economist, Craig James. In truth, to have really benefitted from the present state of affairs you would have needed to have been a buyer three years ago and a seller now, one not looking to move up or get back into the market. Such short investment periods do not suit most investors, particularly self-managed super fund trustees who generally seek a longer term hold.
And so if the time feels right for you to either enter the market for the first time, or add to an already growing property portfolio, you should know what to do in 2015, and where will be the best areas to invest.
Beware the best and ask “what’s next?”
The first and most important thing for 2015 is to beware of the hottest market, Sydney. Had you bought in much of Sydney two years ago, you would presently be sitting on a nice gain of anything between 15 – 20%, with small pockets having performed well above that figure. If you are feeling as if you’d like to be part of that action – it’s too late. While some experts are predicting further gains of between 5 – 7% this year, I’m fairly convinced that those same gains will dissipate in 2016, falling prey to the inevitable correction which occurs at the end of a bull run. While I don’t expect major value losses from today’s prices, no investor really wants to buy at the tail-end of a boom, only to sit for many years waiting for the next. Property needs to return cash flow and growth, or else as an investment, it’s a very poor one indeed.
The next thing is to identify the markets which are the most likely to be next. These markets will have the following characteristics:
- A population which is growing faster than the national average (presently 1.8%).
- Significant infrastructure projects either in the pipeline or recently completed. Most importantly, transport infrastructure, since logistics and manufacturing are going to be the supporters of economic growth in the coming few years.
- Little new land available for additional development, including no access to broad-acre lots for future rezoning.
- The family demographic representing the most significant portion of the population (with a protracted period of low interest rates expected, the family demographic will make up the bulk of the purchasers) and,
- Rich in the service provision required to keep these families in the area, upgrading their homes within the area rather than moving out, and placing pressure on established housing.
Such an area should then deliver generational growth – that is, growth which is not subject to buyer frenzy and pressure from those with a fear of missing out. Rather, the area will experience a steady climb to undersupply, at which time the market will have at least one period of exceptional growth, and possibly more than one, depending upon your investing time frame. The area will also be supported by strong employment opportunities as the economy delivers a return to strong GDP growth.
I’m picking South East Queensland as a great spot to bag a bargain today and reap many years of solid performance. Yet, unlike other observers who are pinning hopes on inner urban suburbs, I like those which are the present recipient of massive transport infrastructure upgrades, and creation of improved employment opportunities. These areas include the Logan and Upper Mount Gravatt areas to the south of Brisbane, and much of the Moreton Bay Shire to the north, focusing on the coastal areas of Redcliffe, Margate and Kippa-Ring. These areas have easy proximity to the airport (20 minutes) and the city (40 minutes) and represent great rental return while you wait for the growth, which will come. What’s not to like about property like that?