Experts wax eloquent on location

PUBLISHED : Wednesday, 26 July, 2006, 12:00am
UPDATED : Wednesday, 26 July, 2006, 12:00am

PROPERTY OWNERS in 'the lucky country' enjoyed years of good fortune from the late 1990s to early 2000s, when their investments delivered double-digit growth year after year.

After a crack started to appear in the market in 2004, many feared that a hard landing could be just around the corner. Although property values in much of Australia have tended to move sideways since, the ANZ Bank predicts more bright spots on the horizon. Its outlook for the coming few years is for prices nationally to achieve modest annual growth of about 4 per cent overall, with some disparities between the states.

The good news for landlords is that tightening housing conditions have pushed up demand for rental properties. According to the Real Estate Institute of Australia (Reia), vacancy rates across Australia are at an all-time low, while at the same time rents are rising. The opportunities this creates for improved residential property investment yields 'should catch the attention of property investors across the country', Reia reported in June.

But is now a good time to buy? Michael Bentley, managing director of Citylife Property Group, said it was impossible to talk about the Australian market as a whole, as each city tended to operate on a different property cycle. For example, he said, the Sydney market had been quiet since mid-2003, while Perth had been booming.

With the Australian capital cities, the property cycle generally spanned seven to 12 years, and the 'ideal' time to buy was at the beginning of the upward trend. But while timing was important, location was critical, Mr Bentley said.

'If choosing between a home in an outer or regional area and a more expensive but better located apartment, as a general rule go for the apartment, especially if you are an overseas investor. It will be easier to rent out,' he said.

According to Mr Bentley, Australia's high rate of owner occupancy (70 per cent) was another market stabiliser. 'While no one can guarantee prices will rise at 10 per cent or even 5 per cent a year forever, these owner occupiers protect the investor,' he said. 'Their properties are their homes, so in a downturn they do not rush to sell. This provides a natural buffer against panic selling, such as [what] occurs in the stock market.'

Maurice Goldberg, chairman of the Sydney-based Ark Group, which researches new residential developments across Australia, said research had overtaken location as the key factor in property investment. Unlike Hong Kong, Australia did not have boom-and-bust cycles, he said.

'After a strong phase, we might get 4 or 5 per cent negative growth, but the market is still incredibly stable, very low risk, and offers a high return on investment.'

The next question is where to buy. Mr Goldberg recommended that investors studied research on issues such as population movement, employment figures and infrastructure spending. 'This tells us a lot about where people should invest,' he said.

Population is one of the strongest factors influencing capital growth, and in this regard Brisbane is a standout.

The Australian Bureau of Statistics predicts that Queensland will account for almost 40 per cent of Australia's total population growth between now and 2051. Almost half of that growth is expected in the statistical district of Brisbane, and a quarter in the rest of South East Queensland.

With this huge population growth and the massive infrastructure projects under way in Queensland, Brisbane and its neighbouring areas were fast becoming the location where people wanted to live, said Terry Taylor, joint managing director of boutique marketing group Which Property, which has offices in Brisbane and Shanghai.

And there are jobs aplenty. Queensland has been responsible for 37 per cent of all Australian jobs in the past four years and its unemployment rate in May was a low 4.6 per cent.

'In addition, cheaper housing than most other Australian capital cities, a high level of job creation and an enviable climate make Queensland the preferred destination for thousands of interstate and international migrants every year,' Mr Taylor said.

Andrew Harper, managing director of Brisbane-based boutique property company Cornerstone Properties, said Brisbane's hot spot seemed to be the Fortitude Valley area, close to the city, where quality developments such as The Hub Apartments were making their mark.

'The Hub Apartments are within 800 metres of Brisbane's premier shopping destination, the Queen Street Mall. In recent years, this area has undergone a vast transformation to become one of Brisbane's trendiest nightspots as well as a desirable residential address,' Mr Harper said.

'Over the past five years the unit market has experienced substantial growth, with an average of 10.5 per cent per annum.

'The continued population growth within South East Queensland, coupled with a lack of developable land to accommodate this growth and the successful urban renewal that is continuing in the area, all strengthen our belief that The Hub Apartments offer an excellent investment opportunity,' Mr Harper said.