Hi all, what is the general consensus on where the AU Property market is heading in the next couple of years and how sustainable it is? I will put a few pointers for discussion
- Canberra and Hobart Markets both had a great start to the post-Covid boom and then suddently turned flat and even negative in some places. Both as a whole are currently sitting at negative 12 month returns.
- Perth, Adelaide & Brisbane have all seen close to 90% price rises since covid. I dont know about Perth and Brissy but I just cant understand the Adelaide market (pointers below)
- Sydney is already too expensive and yields are low for investors. Melbourne on the other hand, seems to be going up in some pockets but long terms forecast are still not good. A lot of investors are still not keen given the crappy tenancy laws there
Now why I don't understand the Adelaide market -
- Adelaide is mostly a service industry with not a lot of manufacturing and not much tourism either. Job and wage growth has not been the same as the housing growth. There are currently no family homes that one can buy for less than $650k and those are in below average suburbs. To get into a mid-range suburb, one needs to spend $1m+ and in a good suburb with good schools, $1.4m+.
- There is a massive pipeline of new builds but they take time due to lack of Government support and labour/material shortages. Those new builds are also further away from city in North and South. Whatever is being built in city fringe is mostly apartments and terrace homes.
- Adelaide has the lowest population growth forecast when compared with eastern states and Perth so all these new houses when they hit the market, Adelaide risks being over supplied too. But since the government is trying really hard to keep the housing problem, it might be 4+ years before this supply hits the market.
There is lots of talk about Adelaide market continuing to grow as the interest rates are cut. The property investors, developers and sellers seem to all say the same thing - "The government can not let the property market crash and no one ever loses money". They say Perth of a decade ago is never to be repeated.
Question is - Are these developers correct? or is Adelaide about to turn into a Perth of 2010s?
Now here is a scenario to consider for a family and what you would do? To make it easier, lets say they are 40 years old and plan to retire at 60 -
- Have a PPOR with mortgage and enough money in offset to pay off 75% of the loan.
- Have Inv Properties worth $2m with $1m owing and paying themselvesoff. One of them is at the end of growth cycle and may not see further growth for 5 odd years.
- Super balances are about $200k only and forecast at age of 60 is about $1 - $1.2m
What advice would you give to this couple so they can comfortably retire at 60? Should they pay off their house as quickly as they can and live debt free? Or would you think it is better they buy another investment property say for $650k whichin 20 years will likely be $1.5m.
They asked a financial planner and were suggested to increase super contribution and invest in managed funds. They didn't like it as they do not want to be in a situation where their money is stuck in super and they needed it. They also aren't comfortable with managed funds as have previous bad experiences in the share market.
Appreciate some genuine discussions on both points above.
I dunno dood